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In Perfect Competition, a Change in Fixed Cost

question 229

Essay

In perfect competition, a change in fixed cost:
A.will cause a change in the price in the short run.
B.will cause a change in output in the short run.
C.will encourage entry or exit in the long run so that price will change enough to leave firms earning zero profits.
D.will cause a change in variable cost, too.


Definitions:

Economic Significance

The importance or impact of an economic activity or phenomenon in terms of its effects on the overall economy, such as employment levels or GDP.

Exchange

The act of trading goods, services, currencies, or other items of value between parties.

Comparative Advantage

The ability of an individual or country to produce a good or service at a lower opportunity cost than competitors.

Production Possibilities Curve

A graph that shows the combinations of two goods that an economy can produce using all its resources efficiently.

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