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28 Nov 2020
In a competitive market with identical firms:
1. free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.
2. firms can earn positive economic profit in the long run if the long-run market supply curve is upward sloping.
3. an increase in demand in the short run will result in a new price above the minimum of average total cost, allowing firms to earn a positive economic profit in both the short run and the long run.
4. firms cannot earn positive economic profit in either the short run or long run.
In a competitive market with identical firms:
1. free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.
2. firms can earn positive economic profit in the long run if the long-run market supply curve is upward sloping.
3. an increase in demand in the short run will result in a new price above the minimum of average total cost, allowing firms to earn a positive economic profit in both the short run and the long run.
4. firms cannot earn positive economic profit in either the short run or long run.
Sonal BahlLv10
28 Jan 2021
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Monopolistically competitive firms
| a. | are guaranteed to earn a short-run economic profit |
| b. | may earn short-run economic profits, although long-run economic profit is typically zero |
| c. | may earn economic profit both in the short run and in the long run |
| d. | earn zero economic profit both in the short run and in the long run |
| e. | can only earn an economic profit in the inelastic portion of their demand curves |
