What Happens in a Perfectly Competitive Industry When Economic Profit

question 66

Multiple Choice

What happens in a perfectly competitive industry when economic profit is greater than zero?

• A) Existing firms may get larger.
• B) New firms may enter the industry.
• C) Firms may move along their LRAC curves to new outputs.
• D) There may be pressure on prices to fall.
• E) All of the above may occur.

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Definitions:

Insurance Policy

A contract between an insurer and policyholder specifying the claims the insurer is legally required to pay.

Co-insurance Clause

A provision in an insurance policy stating that the insurer and the insured will share losses covered by the policy in a specified ratio.

Fireproof

A property of material or construction that provides resistance to fire, preventing or delaying the spread of fire.

Insured

The individual or entity covered by an insurance policy, who is entitled to benefits in case of a covered loss.