If a Graph of a Perfectly Competitive Firm Shows That

question 44

Multiple Choice

If a graph of a perfectly competitive firm shows that the MR = MC point occurs where MR is above AVC but below ATC,

• A) the firm is earning negative profit, and will shut down rather than produce that level of output.
• B) the firm is earning negative profit, but will continue to produce where MR = MC in the short run.
• C) the firm is still earning positive profit, as long as variable costs are covered.
• D) the firm is covering explicit, but not implicit, costs.
• E) the firm can cover all of fixed costs but only a portion of variable costs.

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