A typical firm in a perfectly competitive market made positive economic profits last period. This period,...
A typical firm in a perfectly competitive market made positive economic profits last period. This period,
a. market supply will increase.
b. market price will rise.
c. the firm will produce more.
d. the firm's profits will increase.
Homework Answers
Ans. a) Market supply will increase.
Since a perfectly competitive firm made positive economic profits last year, new firms will try to enter the market which will increase the market supply. These new firms will enter to gain their share of the profits and due to no barriers to entry in the perfectly competitive market.
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