In a perfectly competitive market, smaller- than- efficient sized firms can exist in
A) both the short run and the long run, but they must reduce plant size to remain competitive.
B) both the short and long run.
C) the long run, and they will make positive economic profits.
D) the short run.
E) the long run.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, smaller-than-efficient sized firms can exist in the short run, but they will not be able to make positive economic profits. In the long run, they will either have to exit the market or increase their plant size to become more efficient and competitive.

In a Perfectly Competitive Market, Smaller- Than- Efficient Sized Firms