The Figure Below Depicts the Short-Run Market Equilibrium in a Perfectly

question 13

Multiple Choice

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves. Given that the current equilibrium price is $8, what will happen to the number of firms in this market in the long run?

• A)The number of firms in the market will not change unless there is a change in either demand or in the cost of production.
• B)The number of firms in the market will fall as firms exit the market in response to negative economic profit.
• C)It is impossible to determine whether the number of firms in this market will rise or fall.
• D)The number of firms in the market will rise as firms enter the market in response to positive economic profit.

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Definitions:

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