Since a perfectly competitive firm must accept the price for its output as determined by the product’s market demand and supply, it cannot choose the price it charges. To understand why this is so, consider a different way of writing out the basic definition of profit: Determine the price at which a firm should continue producing in the short runĪ perfectly competitive firm has only one major decision to make-namely, what quantity to produce.Identify profits and losses with the average cost curve.Calculate profits by comparing total revenue and total cost.D) The exit of firms shifts the firm's demand and marginal revenue curves rightward, increasing the firm's level of output and the price the firm can charge until price equals average total cost.By the end of this section, you will be able to: C) The entry of new firms shifts the firm's marginal cost and average cost curves downward, decreasing the firm's level of output and the price the firm can charge until price equals average total cost. B) The entry of new firms shifts the firm's demand and marginal revenue curves leftward, decreasing the firm's level of output and the price the firm can charge until price equals average total cost. ![]() ![]() Which of the following describes how this firm will adjust in the long run? A) The entry of new firms shifts the firm's demand and marginal revenue curves leftward, decreasing the firm's level of output and increasing the price the firm can charge until price equals average total cost. In the short run, a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits.
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