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    Profits in competitive firms

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    In a short-run situation in which quantity demanded equals quantity supplied in a competitive industry, with price greater than the average cost of the typical firm,

    A) total profits across the market are negative and some firms will be forced to leave.

    B) The profit of the typical firm must nonetheless be zero so that firms neither enter nor leave the market.

    C) total profits across the market are positive and some new firms will be attracted to the market.

    D) one firm will grow to dominate the market and set both price and quantity.

    E) none of the above

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    Answer:C) total profits across the market are positive and some new firms will ...

    Solution Summary

    The expert examines profits in competitive firms. A short-run situation in which quantity demanded equals quantities are determined.

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