Competitive Markets Concepts
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Indicate whether each of the following statements is true or false, and explain why?
A. In long-run equilibrium every firm is a perfectly competitive industry earns zero profit.
B. Perfect competition exists in a market when all firms are price takers as opposed to price makers.
C. In competitive markets, P > MC at the profit-maximizing output level.
D. Downward-sloping industry demand curves characterized perfectly competitive markets
E. A firm might show accounting profits in a competitive market but be suffering economic looses.
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Answer A: TRUE
If a firm is earning economic profits, other firms will enter the market to take a share of that profit. Ultimately, the firm ends up earning no economic profits. Similarly if a firm is not earning negative economic profits, then that firm along ...
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