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Chapter 8: Q.26 (page 212)

Do entry and exit occur in the short run, the long run, both, or neither?

Short Answer

Expert verified

In the long run, instead of in the short run, entry and exit take place.

Step by step solution

01

Short run : 

A time period in which at least one input is constant and all others are changeable.

02

Explanation : 

Entry and departure are both time-consuming processes. They can't be done in a short amount of time. As a result, they occur throughout time. All of the inputs are changeable in the long term. Firms are adaptable when it comes to making production-related choices. Because input costs may be modified and new production processes can be implemented to meet the output at the lowest possible cost, businesses can make modifications.

As a result, entrance and exit occur over time, with businesses deciding to enter the market based on predicted profits or exiting the market based on expected losses.

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Most popular questions from this chapter

What prevents a perfectly competitive firm from seeking higher profits by increasing the price that it charges?

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