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- Subject
- Costs , Supply And Perfect Competitioneconomics-mcqs › costs-supply-and-perfect-competition
- Published
- 2 Jun 2019
- Last updated
- 28 May 2026
In a perfectly competitive market, how are short-run abnormal profits eliminated?
Multiple choice question for Costs , Supply And Perfect Competition. Select an option, then review the explanation below.
Explanation
In perfect competition, any short-run abnormal profits attract new firms to enter the market. This increased competition pushes prices down until only normal profits remain. Firms leaving the market reduce supply but do not eliminate profits in the short run, government intervention is not a factor, and advertising does not play a significant role in perfect competition.
More Costs , Supply And Perfect Competition MCQs
Practice related questions from the same subject.
- 1.In the context of a perfectly competitive firm, what represents its short-run supply curve and its long-run supply curve respectively?
- 2.Under what condition will a firm cease production and produce nothing in the short term?
- 3.In the short run, the average total cost is composed of which two components?
- 4.What is the relationship between marginal cost and average cost when the average cost is decreasing and when it is increasing?
- 5.What does it indicate when the long-run average cost curve slopes downward from left to right?