A typical firm in a perfectly competitive market made positive economic profits last period.This period,

Question

Quizplus · Accepted Answer

In a perfectly competitive market, if a firm makes positive economic profits, it implies that the market price is above its average total cost. This attracts new firms to enter the market, increasing the market supply, which leads to a fall in the market price. Therefore, the correct choice is A, market supply will increase. The other choices are incorrect because the rise in market price is not possible, as it is determined by the forces of demand and supply. The firm's production level depends on its own marginal cost and revenue, and the firm's profits may decrease due to increased competition in the market.

A Typical Firm in a Perfectly Competitive Market Made Positive