Answer the following statements true (T) or false (F)
1. In the long run, under conditions of perfect competition, economic profits are eventually eliminated.
2. If the entry of new firms substantially raises demand for resources, two forces tend to eliminate economic profit in the long run: upward pressure on cost and downward pressure on price.
3. The more that firms advertise, the closer they get to perfect competition.
4. The lowest possible ATC curve is attained at the optimal scale of output.
5. If price equals marginal cost at the long-run equilibrium, this means that economic efficiency is being achieved.
1. TRUE
2. TRUE
3. FALSE
4. TRUE
5. FALSE
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Which of the following statements is correct?
a. The average tax rate gauges the sacrifice made by a taxpayer, whereas the marginal tax rate gauges the distortion of taxes on consumer decisions. b. The marginal tax rate gauges the sacrifice made by a taxpayer, whereas the average tax rate gauges the distortion of taxes on consumer decisions. c. The average tax rate measures how much the tax system discourages people from working. d. The marginal tax rate measures total taxes paid divided by total income.
In a monopolistically competitive market,
A. a firm has market power because it produces a differentiated product. B. a firm earns economic profits in the long run because it has market power. C. there are a large number of firms. D. both a and b E. both a and c