Assume That Firms in a Perfectly Competitive Market Are Earning

question 155

Multiple Choice

Assume that firms in a perfectly competitive market are earning economic profits.The statement which describes the change in market price and output as a result of the entry of new firms into this market is

• A)The market demand curve shifts to the right, causing price to rise and market output to increase.
• B)The market demand curve shifts to the left, causing price to fall and market output to decrease.
• C)The short-run market supply curve shifts to the right, causing price to fall and total market output to increase.
• D)The short-run market supply curve shifts to the left, causing price to rise and total market output to decrease.

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Definitions:

Re-election

is the process by which an official, typically in a political context, wins another term in office through a voting process.

Political Business Cycle

Economic fluctuations that result from the cycle of electoral politics and policy adjustments.

Zero Inflation

A situation where there is no general increase in the prices of goods and services in an economy over time.

Temporary Costs

Expenses that are not permanent or enduring, typically occurring for a limited time period.