A Perfectly Competitive Market Is in Short-Run Equilibrium with Price

question 67

Multiple Choice

A perfectly competitive market is in short-run equilibrium with price below average total cost.Which one of the following is not a prediction of the long-run consequences of such a situation?

• A)Price will rise.
• B)Market output will increase.
• C)Firms will exit the market.
• D)The output of each existing firm will increase.
• E)Economic profit will be zero.

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Definitions:

Normal Distribution

A symmetric, bell-shaped distribution of data where most of the observations cluster around the central peak and the probabilities for values further away from the mean taper off equally in both directions.

Symmetric

Describes an object or figure that is identical on both sides of a central dividing line.

Probability Density Function

A function that outlines the likelihood of finding a random variable within a particular range of values.

Uniform Distribution

is a type of probability distribution where every outcome in a certain range is equally likely to occur.