Asked by Julia Ibanez on May 17, 2024
Verified
If firms are making profits under perfect competition,in the long run the industry supply will ______ and price will _____.
A) rise;rise
B) fall;fall
C) fall;rise
D) rise;fall
Industry Supply
The total output of goods or services available from a particular industry at a given price level and time.
- Analyze the impact of entry and exit of firms on long-run equilibrium in perfectly competitive markets.
Verified Answer
AP
Ashay PayneMay 20, 2024
Final Answer :
D
Explanation :
In a perfectly competitive market, if firms are making profits, new firms will be attracted to the market, increasing the industry supply. As supply increases, the price will fall due to the law of supply and demand, leading to a decrease in profits until they are normalized across the industry.
Learning Objectives
- Analyze the impact of entry and exit of firms on long-run equilibrium in perfectly competitive markets.