In a Long-Run Perfectly Competitive Equilibrium with Heterogeneous Firms, the Market

question 5

Multiple Choice

In a long-run perfectly competitive equilibrium with heterogeneous firms, the market price __________ driven down to the bottom of each firm's average cost curve.

• A) may not be
• B) must be
• C) will never be

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Definitions:

Adjustment Heuristic

A rule of thumb where an initial estimate is adjusted based on additional information or analysis.

Cognitive Bias

A systematic pattern of deviation from norm or rationality in judgment, where inferences about other people and situations may be drawn in an illogical fashion.

Availability Heuristic

A decision-making heuristic in which our estimates of frequency or probability of events are based on how easy it is to find examples.

Framing Effect

The influence of wording, or the context in which information is presented, on decision making.