Suppose That a Competitive Market Is Initially in Equilibrium

question 510

Multiple Choice

Suppose that a competitive market is initially in equilibrium. Then demand increases. If entering firms face the same costs as existing firms and sufficient resources are available for entering firms,

• A)the long-run market supply curve will be upward sloping.
• B)the long-run market supply curve will be perfectly elastic.
• C)in the long run firms will suffer economic losses, leading them to exit the industry.
• D)the number of firms will decrease, and the market will become a monopoly.

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Definitions:

Profit Margin

A financial ratio indicating the percentage of revenue that exceeds the cost of goods sold, representing the proportion of each dollar of revenue that constitutes net profit.

ROA

Return on Assets, a financial ratio indicating how profitable a company is relative to its total assets.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that companies use for financial reporting.

GAAP

General Accepted Accounting Principles, which are a set of accounting standards and procedures used in the US to ensure consistency in financial reporting.