Asked by Carter White on Sep 24, 2024
Verified
The main reason(s) firms in a competitive market cannot earn positive profits in the long run is(are)
A) assets can quickly move in and out of the industry when demand fluctuates
B) an increase in demand leads to entry of firms which absorb the extra demand
C) a decrease in demand leads to exit of firms from the market such that there is no surplus
D) all of the above
Competitive Market
A market structure characterized by a large number of buyers and sellers, where no single entity can influence the market price.
Positive Profits
Financial gains that exceed the costs and expenditures incurred in generating revenue.
Demand Fluctuates
The variability in consumer desire to purchase goods or services over time, often affected by seasons, trends, or economic conditions.
- Understand the immediate and future effects on profitability and corporate actions within competitive sectors after shifts in market demand.
Verified Answer
AM
Anuradha Menon4 days ago
Final Answer :
D
Explanation :
The main reason firms in a competitive market cannot earn positive profits in the long run is that assets can quickly move in and out of the industry when demand fluctuates, resulting in increased competition. An increase in demand leads to the entry of new firms, which can absorb the extra demand, and a decrease in demand leads to the exit of firms from the market, resulting in no surplus. Therefore, all of the above options are correct.
Learning Objectives
- Understand the immediate and future effects on profitability and corporate actions within competitive sectors after shifts in market demand.