In a Perfectly Competitive Market, When the Price Is Below

question 137

Multiple Choice

In a perfectly competitive market, when the price is below the minimum average total cost for all firms:

• A)accounting profits will be positive.
• B)firms will likely enter the market.
• C)the price will eventually rise, once enough firms have left the market.
• D)economic profits will be equal to zero.

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Definitions:

Additional Unit

Refers to one more quantity of a good or service added to previous totals, often in contexts discussing costs or benefits.

Complementary Resources

Productive inputs that are used jointly with other inputs in the production process; resources for which a decrease in the price of one leads to an increase in the demand for the other.

Price Decrease

A reduction in the monetary value that must be paid for a product or service.

Resource Demand Curve

A graphical representation showing the relationship between the price of a resource and the quantity of that resource that firms are willing to employ, holding all other factors constant.