Question

Which of the following is NOT a characteristic of a perfectly competitive industry?

Question 19 options:

	Economic profits must be positive in the short run.
	There is free entry and exit in the long run.
	The industry demand curve is downward sloping.
	Each firm produces the same homogeneous product.

Answer 1

In perfectly competitive industry, perfectly competitive firms are free to enter and exit the industry in the long run.

The industry demand curve is downward sloping and the firm's demand curve is horizontal to X-axis.

Each firm in the perfectly competitive industry produces the same homogeneous product.

In short run firm either have economic profit or economic loss. It means there could be a negative economic profit (economic loss) in the short run.

Answer: Option (A) i.e., Economic profits must be positive in the short run.