Asked by
Tiffany Nguyen
on Nov 27, 2024
Verified
Augi's Art Shack sells art supplies in a perfectly competitive market. The firm is currently realizing economic profits of $25,000 in the short run. In the long run we would expect Augi's to
A) realize economic profits greater than $0 but less than $25,000.
B) realize economic profits of $0.
C) realize economic losses greater than $0 but smaller than $25,000
D) shut down.
Economic Profits
The difference between a firm's total revenue and its total costs, including both explicit and implicit costs, representing excess earnings over the normal rate of return.
Perfectly Competitive Market
A market structure characterized by many buyers and sellers, identical products, and no barriers to entry or exit, leading to efficient price determination.
Short Run
A period in which at least one factor of production is fixed and cannot be changed.
- Acknowledge that, eventually, the characteristic of purely competitive markets to neutralize economic profits arises from the movement of firms entering or exiting the market.
Verified Answer
EA
Learning Objectives
- Acknowledge that, eventually, the characteristic of purely competitive markets to neutralize economic profits arises from the movement of firms entering or exiting the market.