If demand decreases in the short-run in a perfectly competitive market, we expec
ID: 1200832 • Letter: I
Question
If demand decreases in the short-run in a perfectly competitive market, we expect Firms will make positive profits in the short-run, and then some firms will exit Firms will make positive profits in the short-run, and then more firms will enter Firms will make negative profits in the short-run, and then some firms will exit Firms will make negative profits in the short-run, and then more firms will enter Refer to the accompanying figure. Point corresponds to the profit-maximizing quantity at which a firm in a competitive market would choose to produce A B C D EExplanation / Answer
(7)
The correct answer is option (D). If demand decreases in the short-run in a perfectly competitive market, we expect that the firms will make more negative profits in the short-run, and then more firms will enter the market. The existence of a firm depends upon the increase in the popularity in the market.
(8)
The correct answer is option (C). It shows that profit maximisation property takes place when marginal revenue is equal to marginal cost.
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