Figure 11.4.4 Refer to Figure 11.4.4, which shows the cost curves and mar...

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Figure 11.4.4

Refer to Figure 11.4.4, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. Which of the following events occurs in the long run?

Each firm is

incurring an economic loss, so some firms exit the market, which decreases market supply.

✅

making an economic profit, but some will exit the market and market supply decreases.

❌

making an economic profit, so new firms will enter the market and market supply increases.

❌

incurring an economic loss, but new firms enter the market, which increases market supply.

❌

incurring an economic loss, but since price exceeds average variable cost, it remains in the market.

❌

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