A1. REFER TO FIGURE 1 Which of the following statements does NOT apply? a. The industry comprises a large number of price- taking firms. b. In comparison with the short-run equilibrium, the perfectly competitive firm's output and industry output are both higher in the long run. C. Abnormal profits earned in the short run lead to entry and an increase in supply, eliminating abnormal profits in the long run. d. At the long-run equilibrium price equals marginal cost, and social welfare is maximized. At the long-run equilibrium, each firm earns a e. normal profit.
A1. REFER TO FIGURE 1 Which of the following statements does NOT apply? a. The industry comprises a large number of price- taking firms. b. In comparison with the short-run equilibrium, the perfectly competitive firm's output and industry output are both higher in the long run. C. Abnormal profits earned in the short run lead to entry and an increase in supply, eliminating abnormal profits in the long run. d. At the long-run equilibrium price equals marginal cost, and social welfare is maximized. At the long-run equilibrium, each firm earns a e. normal profit.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Explanation of the correct option and explanation of the incorrect options
Transcribed Image Text:A1. REFER TO FIGURE 1
Which of the following statements does NOT apply?
a.
The industry comprises a large number of price-
taking firms.
b.
In comparison with the short-run equilibrium, the
perfectly competitive firm's output and industry output
are both higher in the long run.
C.
Abnormal profits earned in the short run lead to
entry and an increase in supply, eliminating abnormal
profits in the long run.
d.
At the long-run equilibrium price equals marginal
cost, and social welfare is maximized.
At the long-run equilibrium, each firm earns a
e.
normal profit.
Transcribed Image Text:Figure 1
MC
LAX
AC
q
P
P₁
P₂
92 91
Q₁ Q₂
S₁
52
D
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