In a Competitive Market with Identical Firms

question 197

Multiple Choice

In a competitive market with identical firms,

• A)an increase in demand in the short run will result in a new price above the minimum of average total cost, allowing firms to earn a positive economic profit in both the short run and the long run.
• B)firms cannot earn positive economic profit in either the short run or long run.
• C)firms can earn positive economic profit in the long run if the long-run market supply curve is upward sloping.
• D)free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.

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Definitions:

Variable Interest

An interest rate on a loan or security that can change over time based on the underlying benchmark interest rates.

Security Interest

A creditor’s right to use collateral to recover a debt.

Security Agreement

A written agreement that creates a security interest.

Purchase Money Security Interest (PMSI)

A special type of security interest that allows creditors to obtain priority in a debtor's collateral, provided the credit was used to purchase the collateral.