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:

Elastic Demand

A situation where the demand for a product or service significantly changes in response to changes in its price.

Unbundling

The practice of breaking down a service or product into individual components that can be sold separately.

Pricing Objectives

The goals that a company aims to achieve through its pricing strategy, such as maximizing profit, increasing market share, or achieving a competitive advantage.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, often influencing pricing strategies in economics and marketing.