Answered

At Westonci.ca, we make it easy to get the answers you need from a community of informed and experienced contributors. Explore a wealth of knowledge from professionals across different disciplines on our comprehensive platform. Connect with a community of professionals ready to help you find accurate solutions to your questions quickly and efficiently.

The following statements describe why profits for firms in a perfectly competitive industry tend to vanish in the long run. Select the explanation that most accurately reflects this scenario?
A) Firms try to increase supply to cover their costs if they experience losses, and this leads to zero profits.
B) Firms are unable to generate revenue over time because the demand for products drops.
C) When other perfectly competitive firms see an opportunity to earn profits and enter the market prices drop.
D) When other perfectly competitive firms see an opportunity to earn profits and enter the market, prices rise.

Sagot :

fernadiaz82

Answer:

The correct answer is the option C: When other perfectly competitive firms see an opportunity to earn profits and enter the market the prices drop.

Explanation:

To begin with, in the microeconomics theory the perfect competitive market is characterized by the fact that there a lot of companies that sell an homogenous product and that are price takers of the market itself. So therefore that the only big difference in the firms are the costs and the prices that they have. Moreover, in the long run the firms are obtaining great profits so that leads to the enter of another more companies to the market and the supply rises the prices will have to go low so that will implicate as well a decrease in the prices of every company that now works in that industry.

Thank you for visiting our platform. We hope you found the answers you were looking for. Come back anytime you need more information. We appreciate your visit. Our platform is always here to offer accurate and reliable answers. Return anytime. Westonci.ca is your go-to source for reliable answers. Return soon for more expert insights.