Question

What determines entry and exit of firms in a perfectly competitive industry in the long​ run? in a perfectly competitive industry in the long​ run,
a. new firms will enter if existing firms are making a profit and existing firms will exit if they are experiencing losses.
b. new firms will enter if market demand exceeds market supply and existing firms will exit if market supply exceeds market demand.
c. new firms cannot enter the market due to barriers but existing firms will exit if they are experiencing losses.
d. new firms will enter if existing firms are making a profit and existing firms will exit if they are breaking even or experiencing losses.
e. new firms will enter if price is above the shutdown point and existing firms will exit if price is below the shutdown point?

Answer 1

Answer : a. new firms will enter if existing firms are making a profit and existing firms will exit if they are experiencing losses.

Reason: In a perfectly competitive industry the profits and losses give an indication to the firm on whether they to enter the industry or exit the industry. If a firm cannot cover all costs, it will exit.