Introduction to Economics 1 Deneme Sınavı Sorusu #1274244
Which of the following is true regarding long run in a perfect competitive market?
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Firms suffer an economic loss in the long run. |
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Firms make a very large economic profit in the long run. |
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In the long run there is no incentive to enter or exit the market. |
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It is impossible for a firm to expand its production capacity in the long run. |
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In the long run, each firm has a Price(P) = Maximum average cost (ACmax). |
In the short run, firms can make a profit or suffer an economic loss. A positive economic profit creates an incentive to enter the market whereas an economic loss causes a firm to shut down and exit in the long run. A perfectly competitive firm makes zero profit in the long run. Long-run equilibrium can be defined as a case in which there is no incentive to enter or exit. In the long-run equilibrium, each firm has: P = MC = ACmin = LRACmin.
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