If a Perfectly Competitive Market Is in a Short-Run Equilibrium

question 138

Multiple Choice

If a perfectly competitive market is in a short-run equilibrium and each firm has P > SRATC,then

• A)individual firms in the industry will increase their output.
• B)new firms will enter the market because existing firms are earning economic profits.
• C)the market supply curve will become less elastic.
• D)existing firms will continue to earn economic profits in the long run.
• E)price will fall in the short run as it is too high and firms are making economic profits.

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Definitions:

Expense Allocation

The process of distributing costs among different departments, projects, or accounts, based on their usage or benefit from the services.

Maintenance Department

A functional area in a business dedicated to the upkeep, repair, and smooth operation of assets and equipment.

Direct Expenses

Costs that can be directly attributed to the production of goods or services, such as raw materials and labor.

Transfer Price

The price at which divisions of a company transact with each other, often used for the sale of goods or services within the company.