Question

Phil sells duck calls in a perfectly competitive market. If duck calls sell for $10 each and average total cost per unit is $11 at the profit-maximizing output level, then in the long runa. more firms will enter the market.b. some firms will exit from the market.c. the equilibrium price per duck call will fall.d. average total costs will fall.

Answer 1

a. more firms will enter the market.

Explanation:

In the short term, there is economic loss. The price is $10 and the average cost is $11, meaning that every unit sold has a loss of one dollar. Registration and withdrawal is open when there is a long-term, and loss-making units can leave the market. This will lower the supply and raise the market price, but the cost of production will not change.

Hence some firm will leave the market