A perfectly competitive market is in short-run equilibrium with the market price below each firm's average total cost. Which of the following outcomes is not a long-run prediction of the perfect competition model?

Question

A perfectly competitive market is in short-run equilibrium with the market price below each firm's average total cost. Which of the following outcomes is  not  a long-run prediction of the perfect competition model?

Accepted Answer

Market output will increase.

Answer

The output of each remaining firm will increase.

Answer

Some firms will exit the market.

Answer

Economic profit of each firm will be zero.

Answer

The market price will rise.

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A perfectly competitive market is in short-run equilibrium with the market price...

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