Economics Questions Glendale Community College Econ 101 Winter 2022 Test 3 Question 8

Refer to the graphs above of perfectly competitive firms.  Which graph(s) depict situations in which market prices will fall in the future.

a.  II because firms are making economic profits, which will entice firms to enter the market and subsequently cause prices to fall.

b. I because firms are making economic profits, which will entice firms to enter the industry and subsequently cause the market price to fall.

c. III and IV because the firm in graph III will immediately shutdown and the firm in graph IV will shut down in the long run. Firms will see opportunity in the industry, which causes the market price to fall.

d. III and IV because the firms in both graphs will immediately shutdown and some firms in the industry will exit causing the price to fall.