In the Long Run, New Firms Enter a Perfectly Competitive

question 56

Multiple Choice

In the long run, new firms enter a perfectly competitive market when

• A) the existing firms are weak because they are incurring economic losses.
• B) normal profit is equal to zero.
• C) economic profit is greater than zero.
• D) normal profit is greater than zero.
• E) economic profit is equal to zero.

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Definitions:

Recession

A temporary economic slump, associated with a drop in business and manufacturing activities, commonly distinguished by a successive decline in GDP across two quarters.

Cyclical Unemployment

Cyclical unemployment is the component of overall unemployment that results from economic recessions or expansions, influenced by the business cycle.

Economy

An area or system in which goods and services are produced, distributed, and consumed by various agents, encompassing local to global scales.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.