17. When firms have an incentive to exit a perfectly competitive market, their e

Question

17. When firms have an incentive to exit a perfectly competitive market, their exit will a. lower market price. b. necessarily raise the costs of firms that remain in the market. c. raise profits for fims that remain in the market. d. All of the above are cormect. 18. In a perfectly competitive market that is characterized by free entry and exit, a. all firms will operate at efficient scale in the short run. b. all firms will operate at efficient scale in the long run. c- the price of the product will differ across firms. d- the number of sellers in the market will steadily decrease over time.

Explanation / Answer

Q17
Answer
Option c
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The supply curve shifts to the left because of exit of a firm and the price level increases which and the costs are same so the profit increases for remaining firms in the market

Q18
Answer
Option b
The firms operate at zero economic profit in the long run where MC=P=ATC so the firms are efficient.

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