Suppose a perfectly competitive market is in a short-run equilibrium.If some firms exit the market,the profit of the remaining firms ________; if some firms enter the market,the profit of each existing firm ________.
A) decreases; is unchanged
B) increases; decreases
C) increases; is unchanged
D) is unchanged; is unchanged
E) decreases; increases

Question

Quizplus · Accepted Answer

When firms exit the market, the supply decreases, leading to higher prices and potentially higher profits for the remaining firms. Conversely, when new firms enter, the supply increases, leading to lower prices and decreased profits for existing firms.

Suppose a Perfectly Competitive Market Is in a Short-Run Equilibrium