If, for a perfectly competitive firm, the price exceeds average total cost:
A) the market price will decrease as firms enter.
B) the market price will increase as firms enter.
C) the market price will decrease as firms exit.
D) the market price will increase as firms exit.

Question

Quizplus · Accepted Answer

When the price exceeds average total cost, firms in a perfectly competitive market will earn profits, attracting new firms to enter the market, which increases supply and causes the market price to decrease.

If, for a Perfectly Competitive Firm, the Price Exceeds Average