If the Typical Firm in a Perfectly Competitive Market Is

question 169

Multiple Choice

If the typical firm in a perfectly competitive market is currently earning a 5% economic profit,what will happen in this market in the long run?

• A)new firms will enter until the economic profits have disappeared.
• B)firms will exit until the economic profit reaches 10%.
• C)firms will neither enter nor exit,since 5% economic profit is enough to maintain the existing number of firms in the market.
• D)It depends on the rate of normal profit in this market.

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Definitions:

Limited And Bundled Choice Problem

A situation in which consumers' options are restricted or pre-selected in packages, potentially influencing their preferences or decisions.

Principal-Agent Problem

A dilemma in economics that occurs when one person or entity (the agent) is able to make decisions on behalf of, or that impact, another person or entity (the principal), leading to potential conflicts of interest.

Rent-Seeking Behavior

The practice of manipulating public policy or economic conditions as a strategy to increase personal incomes without adding value.

Public Choice

A field of economics that studies how decisions are made by voters, politicians, and government officials, often applying theories and methods from economics to political science.