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As business firms exit a perfectly competitive market, this will typically increase the profits of those firm who remain in the market
As business firms exit a perfectly competitive market, this will typically increase the profits of those firm who remain in the market. True False
When the price elasticity of demand is less than one it means demand is relatively price inelastic, and the percentage change in quantity demanded is greater than the percentage change in price. O True O False
According to the textbook, economic models do not fully capture the role played by entrepreneurs in a free- market economic system. True O False
Like price takers, price searchers can maximize profits by producing at the point where marginal revenue is equal to marginal cost. True 0 False
A market is said to be contestable when barrier to entry and barriers to exit are high. True False
Expert Solution
1 - True
When some firms exit the competitive market , the demand for the existing firms rise. This leads to rise in revenue and hence profits for existing firms
2 - False
Inelastic demand means that percentage change in quantity demanded is less than percentage change in demand. If it will be greater , demand would be elastic
3 - True
The theory of entrepreneurship was not properly accomodated in the various economic models and free market economy though they have a big hand in it. Hence the statement given is correct
4 - True
Each market maximises the profits at level where MR = MC whethet it is price taker or searcher
5 - False
Contestable markets are such markets which have the freedom of exit and entry and have low sunk cost.
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