Asked by
Andrew Navelino
on Nov 16, 2024
Verified
Refer to Scenario 16-1. Which of the following statements best describes the long-run adjustment in this market?
A) One or more ice cream shops in Fairfield closes, increasing the demand for Venya's ice cream.Venya's profits increase and he sustains positive profits in the long run.
B) One or more ice cream shops in Fairfield closes, increasing the demand for Venya's ice cream.Venya's profits increase until he earns zero profit.
C) One or more new ice cream shops in Fairfield opens and competes with Venya for customers, reducing the demand for Venya's ice cream.Venya's profits decline until he incurs losses and exits the industry.
D) One or more new ice cream shops in Fairfield opens and competes with Venya for customers, reducing the demand for Venya's ice cream.Venya's profits decline until he earns zero profit.
Long-Run Adjustment
The process through which inputs and outputs fully adjust to changes in the market, considering all potential variable and fixed costs.
Zero Profit
A situation where a firm's total revenue is exactly equal to its total costs, resulting in no net profit.
- Discern the mechanisms through which market dynamics in monopolistic competition result in the realization of zero economic profit over an extended period.
Verified Answer
ME
Learning Objectives
- Discern the mechanisms through which market dynamics in monopolistic competition result in the realization of zero economic profit over an extended period.
Related questions
Refer to Figure 16-3 ...
(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in ...
(Figure: Monopolistic Competition V)Use Figure: Monopolistic Competition V ...
(Figure: Monopolistic Competition II)Use Figure: Monopolistic Competition II ...
(Figure: Monopolistic Competition II)Use Figure: Monopolistic Competition II ...