Question

Long-run adjustments in purely competitive markets primarily take the form of

1. variations in the cost curves of different firms in the market.
2. entry or exit of firms in the market.
3. evolution of the market from a constant-cost to an increasing-cost industry.
4. product differentiation.

Answer 1

2. entry or exit of firms in the market.

Step-by-step explanation:

A perfect competitive market is when there are many buyers and sellers of homogenous goods and services.

Firms sell homogenous products both in the short and long run.

There are no barriers to entry and exit of firms into the market.

Firms in a perfect competition earn zero economic profit in the long run. If in the short run, firms make economic profit, firms enter into the market in the long run.

If in the short run, firms make economic profit, firms leave the market in the long run.