Asked by Xandrei Lugay on May 05, 2024
Verified
Which statement is true about the perfect competitor?
A) Firms operate at peak efficiency in the short run.
B) Economic profits are greater than accounting profits.
C) Firms that survive must make a profit in the long run.
D) The demand curve is perfectly elastic for each firm.
Perfect Competitor
A theoretical firm in a perfectly competitive market that cannot influence the market price of its product and can only decide the amount of output produced.
Perfectly Elastic
A situation in demand or supply where quantity changes infinitely in response to any change in price.
Economic Profits
The difference between total revenue and total costs, including both explicit and implicit costs.
- Comprehend the distinctions between demand curves for the entire industry and for a single firm within a perfectly competitive market.
- Recognize the characteristics and implications of perfect competition on firms and market outcomes.
Verified Answer
DM
Dillon MartinezMay 11, 2024
Final Answer :
D
Explanation :
The defining characteristic of a perfect competition market is a perfectly elastic demand curve for each individual firm. In this market structure, firms operate at peak efficiency in the long run, but may experience losses in the short run. Economic profits are equal to zero in the long run, as entry and exit of firms occurs to eliminate excess profits. Accounting profits may still be positive, but economic profits are zero.
Learning Objectives
- Comprehend the distinctions between demand curves for the entire industry and for a single firm within a perfectly competitive market.
- Recognize the characteristics and implications of perfect competition on firms and market outcomes.