For each of the following statements about perfect competition, identify whether the statement is true or false and briefly explain your reasoning. If the market price is below the break-even price for an individual firm in a perfectly competitive market, then the firm would always be better off shutting down and producing zero in the short-run. The size of a firm’s fixed cost in the short-run will have no impact on the profit maximizing level of output for a firm in the short-run. If all firms are identical, free entry and exit will cause perfectly competitive firms to earn zero economic profits in the long-run.
For each of the following statements about perfect competition, identify whether the statement is true or false and briefly explain your reasoning. If the market price is below the break-even price for an individual firm in a perfectly competitive market, then the firm would always be better off shutting down and producing zero in the short-run. The size of a firm’s fixed cost in the short-run will have no impact on the profit maximizing level of output for a firm in the short-run. If all firms are identical, free entry and exit will cause perfectly competitive firms to earn zero economic profits in the long-run.
Chapter12: Firms In Perfectly Competitive Markets
Section: Chapter Questions
Problem 2P
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For each of the following statements about perfect competition, identify whether the statement is true or false and briefly explain your reasoning. If the market price is below the break-even price for an individual firm in a perfectly competitive market, then the firm would always be better off shutting down and producing zero in the short-run. The size of a firm’s fixed cost in the short-run will have no impact on the profit maximizing level of output for a firm in the short-run. If all firms are identical, free entry and exit will cause perfectly competitive firms to earn zero economic profits in the long-run.
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