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

question 131

Multiple Choice

In a perfectly competitive market, the process of entry and exit will end when firms in the market:

• A)are making zero economic profit
• B)are operating with excess capacity
• C)capture market power
• D)experience decreasing marginal revenue

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Definitions:

Laspeyres Index

A measure of price inflation that calculates the relative price change of a fixed basket of goods and services at current prices compared to the prices of the same basket in a base period.

Price Levels

The overall average price of all goods and services made in the economy.

Consumption Levels

The amount of goods and services consumed by an individual or population.

Base Year

A point of reference year used for comparative purposes, especially in economic indices and statistics.