In a perfectly competitive market, a firm profit maximizes by choosing to produce the level of output for which
a. marginal revenue equals marginal cost.
b. total revenue equals marginal costs.
c. externalities are minimized.
d. net social benefits are greatest.
e. marginal costs are minimized.
.
if economic profits are positive for firms in a perfectly competitive market, then
a. market supply will shift to the left.
b. each firm will decrease production.
c. new firms will enter the market.
d. accounting profits are negative.
Answer
Option a
the firm produces at MR=MC to maximize profit if P>AVC. the
social benefits are also greatest but it is just a coincidence and
firms and/or buyer does not aim for it.
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Answer
Option c
the firms are earning profit so the new firms will encourage to
enter the market and shifts the supply curve to the right up to
there is zero economic profit in the market.
Each firm will decrease product as new firms enter the market
so the flow is:
Economic profit - new firms enter - price decrease - old firms production decreases and economic profit decreases to zero.
In a perfectly competitive market, a firm profit maximizes by choosing to produce the level of...
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