Roger owns a small health store that sells vitamins in a perfectly competitive market. If vitamins sell for $12 per bottle and the average total cost per bottle is $11.50 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 bottle will rise
D)average total costs will rise.

Question

Quizplus · Accepted Answer

At the profit-maximizing output level, the firm is earning a small economic profit. This signals to other firms that there is an opportunity for profit in this market. Therefore, more firms will enter the market in the long run, increasing competition and driving down prices until each firm is earning only normal profits.

Roger Owns a Small Health Store That Sells Vitamins in a Perfectly