Under perfectly competitive market for a firm to be in long run equilibrium whic
ID: 1112845 • Letter: U
Question
Under perfectly competitive market for a firm to be in long run equilibrium which one of the following IS NOT a condition? a. Firm has no incentive to produce any different output, smaller or larger. b. Firm has no incentive to change the size of its current plant. Therefore there is no reason to increase the size of the production. c. There is an incentive for new firms to enter into the industry, so the gowth can occur. d. There is no incentive for firms to enter into or exit from the industry.
Explanation / Answer
Answer-c.
In the long run new firms do not enter the market.In the short run new fitms enters the perfectly competitive market attracted by positive profits.As number of firms rise,the supply rise and price falls.Supply continues to rise until price falls so much that industry starts to make losses.Due to losses firms start leaving the industry untill price rises so much that the industry breaks even or makes zero profits.Profits are eventually zero in the long run.
Therefore,firms cannot enter the incentive for a firm to enter the long run competitive market.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.