Question

In perfect competition, when a firm is making positive economic profit in the short run, then new firms enter the market causing the market supply curve to __________ and the market price to __________. A. Shift right; decrease

B. Shift left; increase
C. Shift right; increase
D. Shift left; decrease

Answer 1

B

competition helps the market price to increase and it will make the market supply curve to to go shift left.

Answer 2

In perfect competition, when a firm is making positive economic profit in the short run, new firms enter the market causing the market supply curve to shift right and the market price to decrease.

Step-by-step explanation:

When a firm is making positive economic profit in perfect competition in the short run, new firms enter the market causing the market supply curve to shift right and the market price to decrease.

Entry of new firms increases the supply of the product in the market, leading to a decrease in the market price. As long as there are still profits in the market, entry will continue to shift supply to the right, reducing the market price.

This process stops when the market price is driven down to the zero-profit level, where no firm is earning economic profits.