Which of the following is not an assumption that we make in analyzing pure competition in the long run?
A)Firms are free to enter into or exit from a purely competitive market.
B)We may talk about a "representative" firm by assuming that competitive firms all have identical cost curves.
C)Firms may increase output by expanding their plant sizes.
D)Profits are not relevant to firm behavior anymore, because competitive firms earn zero profits in the long run.

Question

Quizplus · Accepted Answer

In the long run, firms in a purely competitive market earn normal profits (zero economic profits), but profits are still relevant to firm behavior as they influence entry and exit decisions.

Which of the Following Is Not an Assumption That We