The market for a competitive price-taker market clears at a price of $3, and the minimum average cost for all firms is $2.50. In the long run, we would expect an increase in
A) each firm's output.
B) the number of firms.
C) each firm's profit.
D) each firm's average cost.

Question

Quizplus · Accepted Answer

In the long run, if the market price is above the minimum average cost, new firms will enter the market, increasing the number of firms until profits are driven to zero.

The Market for a Competitive Price-Taker Market Clears at a Price