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 firms that remain in the market. d. All of the above are correct. 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
the decrease in the number of seller and the supply curve shifts to the left which increases the price and the profit for these firms

Q18
Option b
the free entry and exit operate at zero economic profit in the long run where MC=P=ATC so that both efficiencies are possible in long run.

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