Question

In a perfect competitive market, the level of short run and long run economic profits are determined by. What?

Answer 1

Answer in one sentence

Answer 2

Is it:
A. Other firms entering and exiting the industry
B. Accepting and prevailing market price
C. Selling a differentiated product and charging at different price level
D. Colluding with other firms to determine pricing and output

Answer 3

In a perfect competitive market, the level of short run and long run economic profits are determined by the equilibrium between supply and demand. In the short run, economic profits can fluctuate due to temporary shifts in supply or demand, but in the long run, as firms enter or exit the market to take advantage of profits, economic profits tend to converge towards zero. This is because in a perfectly competitive market, there are no barriers to entry or exit, so firms will continue to enter the market until profits are driven to their lowest possible level. Overall, in the long run, firms in a perfectly competitive market can only earn normal profits, which represent the minimum return needed to keep resources in the industry.

Answer 4

In a perfectly competitive market, the level of short run and long run economic profits are determined by the equilibrium between supply and demand, with profits tending to converge towards zero in the long run due to ease of entry and exit.

Answer 5

B. Accepting and prevailing market price