Figure 10-6 -Given That the Short-Run Cost and Demand Conditions Shown in Conditions

question 192

Multiple Choice

Figure 10-6
-Given that the short-run cost and demand conditions shown in Figure 10-6 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 see some of its competitors exit from the industry, causing this firm's demand to increase until zero economic profits are restored.
• D) This industry is in long-run equilibrium and will not experience any new entry or exit of firms.

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Definitions:

Price

The amount of money required to purchase a good or service, determined by factors such as supply and demand.

Segment Representation

The act of depicting or representing specific subgroups or segments within a broader market or population.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount that they actually do pay.

Market Entry

The process by which a firm enters into a new market to compete and offer goods or services.