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 run
A)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.

Question

Quizplus · Accepted Answer

Since the average total cost is greater than the price, Phil is not making any economic profit. In the long run, some firms will exit the market as they are not making any profit, causing the market supply to decrease and the equilibrium price to rise.

Phil Sells Duck Calls in a Perfectly Competitive Market