Answer Happy

Cost, Price $31.25 $25 $20 $18.75 $12.5 $6.25 $0.0 I I MC 20 40 60 80 100 120 140 160 180 200 220 240 260 O Prices in the market will increase because of an increase in demand. ATC P-MR Quantity Reference the graph shown above, which illustrates a perfectly competitive firm. Based on the graph, what is most likely to happen: O Prices in the market will decrease because of an increase in supply. O Prices will most likely decline. This is because firms will enter the market because of the positive economic profits present in the market. Firms in a competitive market earn zero accounting profits in the long-run due to the fact that there are zero barriers to entry in a perfectly competitive market. O Prices will most likely decline. This is because firms will exit the market because of the negative economic profits present in the market. Firms in a competitive market earn zero economic profits in the long-run because of free entry and exit.