In the Short Run, a Perfectly Competitive Firm Earning Negative

question 89

Multiple Choice

In the short run, a perfectly competitive firm earning negative economic profit:

• A) is on the downward-sloping portion of its AVC.
• B) is at the minimum of its AVC.
• C) is on the upward-sloping portion of its AVC.
• D) is not operating on its AVC.
• E) can be at any point on its AVC.

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Definitions:

Units

In economics, units refer to the quantifiable measures used to express the quantity of an item, such as pieces, kilograms, liters, etc., used in transactions or production.

Total Cost

The complete cost of production, encompassing both fixed and variable costs, for a good or service.

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced; decreases as production increases.

Average Variable Cost

The per unit cost of variable inputs divided by the total quantity of output produced, reflecting the variable cost of production.