Which of the following is true of a perfectly competitive market? A) If economic profits are earned then the price will fall over time. B) In long-run equilibrium P MR = SRMC

Question

Which of the following is true of a perfectly competitive market?
A) If economic profits are earned then the price will fall over time.
B) In long-run equilibrium P > MR = SRMC < SRATC = LRAC.
C) A constant-cost industry exists when the entry of new firms has a significant effect on their cost curves.
D) If the input prices rise the long-run supply curve is downward sloping.

Quizplus · Accepted Answer

In a perfectly competitive market, if firms are earning economic profits, this attracts new firms into the market due to the absence of barriers to entry. The increase in supply from these new entrants leads to a decrease in the market price over time until economic profits are eliminated, and firms earn only a normal profit in the long-run equilibrium.

Which of the Following Is True of a Perfectly Competitive