Use the Figure to Answer the Following Question(s)

question 50

Multiple Choice

Use the figure to answer the following question(s) .
Figure 10-5

Given that the short-run cost and demand conditions shown in Figure 10-5 for the competitive price-searcher firm are representative for all firms in the industry, what will happen in this industry in the long run?

• A) The firm will make long-run economic profits.
• B) The firm will face competition from new entrants into the industry, causing this firm's demand to decline until zero economic profits are restored.
• C) The firm will face competition from new entrants into the industry, but since lower prices will increase total sales, profit will stay the same as that shown in the figure.
• D) The firm will see some of its competitors exit from the industry, causing this firm's demand to increase until zero economic profits are restored.

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Definitions:

Retailers

Businesses or individuals engaged in the selling of goods or merchandise directly to consumers, typically in small quantities.

Cyclical Unemployment

The increase in unemployment that occurs during recessions and downturns in the economic cycle, typically resulting from a decreased demand for goods and services.

Structural Unemployment

Unemployment caused by a mismatch between the skills or location of workers and the requirements of the job market.

Frictional Unemployment

Short-term unemployment that occurs when individuals are between jobs or entering the labor market for the first time.