Refer to the Graphs Shown, Which Depict a Perfectly Competitive

question 113

Multiple Choice

Refer to the graphs shown, which depict a perfectly competitive market and firm in a constant-cost industry. If market demand increases from D₀ to D₁, in the long run:

• A)new firms will enter this market and price will return to P₀.
• B)new firms will enter this market and price will remain at P₁.
• C)some firms will exit this market and price will return to P₀.
• D)some firms will exit this market and price will remain at P₁.

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Definitions:

Actual Annual

Refers to the true or realistic yearly financial or quantitative performance or output of an entity or activity.

Interest Rate

The cost of borrowing money or the return for investing money, usually expressed as a percentage of the principal amount per year.

Economic Rent

The portion of income earned from a factor of production (land, labor, or capital) that exceeds the minimum amount necessary for it to be utilized in its current use.

Natural Resources

Materials or substances occurring in nature which can be exploited for economic gain, such as minerals, forests, water, and fertile land.