Suppose that Betty's Beads is a typical firm operating in a perfectly competitive market. Currently Betty's MR = $15, MC = $12, ATC = $10, and AVC = $8. 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 its marginal revenue (MR) of $15 is greater than its average total cost (ATC) of $10. In a perfectly competitive market, profits attract new firms, leading to entry until profits are driven to zero in the long run.

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