Suppose that Betty's Beads is a typical firm operating in a perfectly competitive market. Currently Betty's MR = $25, MC = $23, ATC = $20, and AVC = $16. Based on this information, we can conclude that
A)Betty's is in long-run equilibrium.
B)Betty's experience will encourage new firms to enter the market.
C)Betty's experience will encourage some existing firms in this market to leave.
D)Betty's experience will discourage firms from entering the market.

Question

Quizplus · Accepted Answer

Betty's Beads is making a profit since the price (MR = $25) is greater than ATC ($20). In a perfectly competitive market, profits attract new firms, leading to entry until profits are eliminated and the market reaches long-run equilibrium.

Suppose That Betty's Beads Is a Typical Firm Operating in a Perfectly