In a Perfectly Competitive Market, the Process of Entry and Exit

question 393

Multiple Choice

In a perfectly competitive market, the process of entry and exit will end when
(i) accounting profits are zero.
(ii) economic profits are zero.
(iii) price equals minimum marginal cost.
(iv) price equals minimum average total cost.

• A)(i) and (ii) only
• B)(ii) and (iii) only
• C)(ii) and (iv) only
• D)(i), (ii), (iii), and (iv)

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Definitions:

Vertical

Relating to a structure or position that is straight up and down, in alignment with the direction of gravity.

Horizontal Restraint

involves agreements among competitors operating at the same level of the market or supply chain to limit competition or manipulate market conditions.

Trade

The exchange of goods, services, or both between two or more parties, either within a country or internationally.

Price Fixing

An illegal practice where competing companies agree on selling prices of their products or services, rather than allowing market forces to set them.