In a perfectly competitive market,the process of entry and exit will end when (i)accounting profits are zero.
(ii)economic profits are zero.
(iii)price equals minimum marginal cost.
(iv)
Price equals minimum average total cost.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms will enter as long as economic profits are positive, and exit as long as economic profits are negative. Therefore, (ii) is correct as the process of entry and exit will end when economic profits are zero. In the long run, firms will produce at the minimum average total cost, and in a perfectly competitive market, this will be equal to price. Therefore, (iv) is also correct. Price equaling minimum marginal cost (iii) assumes that firms are producing at the efficient level of output, but this does not necessarily mean that accounting or economic profits will be zero. Therefore, (i) is not correct, and the best choice is C, (ii) and (iv) only.

In a Perfectly Competitive Market,the Process of Entry and Exit