Refer to the Diagrams, Which Pertain to a Purely Competitive

question 100

Multiple Choice

Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. In the long run we should expect

• A)firms to enter the industry, market supply to rise, and product price to fall.
• B)firms to leave the industry, market supply to rise, and product price to fall.
• C)firms to leave the industry, market supply to fall, and product price to rise.
• D)no change in the number of firms in this industry.

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Definitions:

Average Cost Pricing

A pricing strategy where the price is set based on the average cost per unit produced, including fixed and variable costs.

Profit-Maximizing

The process of increasing financial gain to the highest possible level given the constraints of the market.

Economic Profit

The difference between a firm's total revenue and its opportunity costs, including both explicit and implicit costs.

Price Regulation

Government or regulatory authority control over the pricing of goods and services, often to prevent excessively high prices or monopolies.