Asked by Frank pelicano on Jun 29, 2024
Verified
In a purely competitive industry,
A) there will be no economic profits in either the short run or the long run.
B) economic profits may persist in the long run if consumer demand is strong and stable.
C) there may be economic profits in the short run but not in the long run.
D) there may be economic profits in the long run but not in the short run.
Purely Competitive
A market structure characterized by many buyers and sellers, free entry and exit, and a homogeneous product, leading to price-taking behavior.
Economic Profits
The outcome of subtracting all varieties of costs, including direct and indirect, from overall sales.
Consumer Demand
The desire and willingness of consumers to purchase goods and services at given prices.
- Acquire knowledge of the necessary conditions for long-run equilibrium in wholly competitive markets and the attainment of typical economic profits.
Verified Answer
ZK
Zybrea KnightJul 04, 2024
Final Answer :
C
Explanation :
In a purely competitive industry, firms may experience economic profits in the short run due to favorable market conditions or efficiencies. However, in the long run, the entry of new firms into the market driven by these short-term profits will increase supply, leading to a decrease in prices until economic profits are eroded to zero. This adjustment ensures that in the long run, firms in a purely competitive market will only earn normal profits.
Learning Objectives
- Acquire knowledge of the necessary conditions for long-run equilibrium in wholly competitive markets and the attainment of typical economic profits.