Statement I.Under perfect competition the firm's demand curve is set by industry-wide supply and demand.
Statement II.The perfect competitor's short-run and long-run situations are identical.

Question

Quizplus · Accepted Answer

Statement I is true because in a perfectly competitive market, individual firms are price takers, meaning the price is determined by the overall supply and demand in the industry, not by the individual firm. Statement II is false because in the short run, firms may not be able to adjust all inputs, leading to potential profits or losses, while in the long run, firms can adjust all inputs and will enter or exit the market until economic profits are zero.