Asked by Keondra Rouse on Jul 28, 2024
Verified
(Figure: Game-Day Shirts) Use Figure: Game-Day Shirts.Rick is one of 10 vendors who sell game-day T-shirts at football games in a perfectly competitive market.His costs are identical to the costs of the other 9 vendors.If the price of a shirt is $14,in the long run:
A) new firms will enter the industry.
B) existing firms will exit the industry.
C) the industry is in equilibrium.
D) the industry has minimized average total cost.
Long-run Equilibrium
A state where all the factors of production in an economy are being used in the most efficient way, leading to a situation where there is no tendency for change.
Perfectly Competitive Market
An economic model marked by a multitude of buyers and sellers, with no barriers to entering or leaving, and identical products.
Average Total Cost
The sum of average fixed costs and average variable costs, representing the total cost of production divided by the quantity of output.
- Describe the role of firm entry and exit in a perfectly competitive market and how it influences long-term equilibrium.
- Determine the prerequisites for achieving long-run equilibrium in a perfectly competitive environment.
Verified Answer
ZK
Zybrea KnightAug 03, 2024
Final Answer :
A
Explanation :
In a perfectly competitive market, if a firm is making a profit (which is implied since the question does not indicate that the price of $14 is below the cost of producing the shirts), new firms will enter the industry in the long run to take advantage of these profits, leading to an increase in supply and a decrease in price until only normal profits are made.
Learning Objectives
- Describe the role of firm entry and exit in a perfectly competitive market and how it influences long-term equilibrium.
- Determine the prerequisites for achieving long-run equilibrium in a perfectly competitive environment.