For perfect competition to? arise, it is necessary that market demand be...

A.large relative to the minimum efficient scale of a single firm.

B.inelastic

C.perfectly elastic.

D.elastic.

E.small relative to the minimum efficient scale of a single firm.

If firms in a perfectly competitive market are making an economic? profit, new firms will enter. This entry shifts the market

A.supply curve? leftward, and the market price rises.

B.supply curve rightward and the market demand curve leftward.

C.demand curve? rightward, and the market price rises.

D.demand curve? leftward, and the market price falls.

E.supply curve? rightward, and the market price falls.

 

Ans

A. Large relative to the minimum efficient scale of a single firm.

E. Supply curve? rightward, and the market price falls.

Step-by-step explanation

The minimum efficient scale is the lowest point on the firm's cost curve where they can produce its goods at competitive price. The firms in this state will be making losses if market demand is not larger than the minimum efficient scale which will make many firm shy from the business. If the firms experience a demand larger than the minimum efficient scale then many businesses will enter the market and give competition to already existing businesses.

When new firms enter a perfect competition market the supply of goods and services will increase as there are many producers. This will cause a shift of supply curve to the right. As there are many products to choose from in the market the market prices will drop. Consumers will be choosing the lower priced commodities.