Question

Consider a market where there are many firms with different cost structures. When determining which firms enter the market first, we look at OA. fixed costs. O B. average variable cost. O C. marginal cost. O D. average total cost. The last firm to enter earns O A. positive economic profits O B. the greatest economic profits. ° C. zero economic profits. 0 D. average economic profits. If demand shifts to the left (decreases), the last firm t that entered O A. eamns negativeeconomie prfti and so exts the market indiferentbween producing orentin he market and so h ndminate ° C. earns negative economic profits and thus undertakes cost-cutting measures to return to profitability. ( D. earns positive economic profits, leading to new firms entering the market

Answer 1

The firm takes the fixed cost into accounting while taking the decision about entering the market. If fixed cost is very high it becomes difficult to make a profit. Option A is correct

The last firm enters earn 0 economic profit. As when there is positive profit firm enter until profit becomes 0. Option c is correct

If the demand shifts to the left price will decrease the last firm will make a negetive profit and undertakes cost-cutting measures as it is possible to make a profit in the future. Option C is correct.