When a Perfectly Competitive Market Is in Its Long-Run Equilibrium

question 167

Multiple Choice

When a perfectly competitive market is in its long-run equilibrium, the fact that the firms make zero economic profit will

• A) encourage new firms to enter the market.
• B) cause existing firms to shut down.
• C) cause existing firms to leave the market.
• D) mean that the firms' owners earn a normal return.

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Definitions:

Income Effect

How an alteration in the income of an individual or an economy influences the demand for a specific good or service.

Legal Hourly Minimum Wage

The lowest hourly pay that employers are legally allowed to pay their workers, as mandated by government law.

Secondary Labor Market

Employment sectors characterized by low pay, low job security, and poor working conditions, often distinguished from primary sectors which offer better employment conditions.

Primary Labor Market

Refers to high-skilled, high-paying jobs that usually require a higher level of education or training, often offering benefits and job security.