When Firms in a Competitive Market Are Experiencing Zero Economic

question 94

Multiple Choice

When firms in a competitive market are experiencing zero economic profits,this is an indication that

• A)They should be producing a different product.
• B)There is currently no better way to use society's scarce resources.
• C)They will eventually go bankrupt.

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Definitions:

Public Good

A good that is non-excludable and non-rivalrous, meaning it can be used by many people simultaneously without depletion.

Free-rider Problem

A situation in which some individuals consume more than their fair share of a public resource, or shoulder less of the cost of its production, benefiting from goods or services without paying for them.

Nonexcludable Problem

An issue characteristic of public goods, where it is not possible to prevent individuals who do not pay from consuming a good or service.

Optimal Level

The most favorable or efficient level of output or activity under given conditions, maximizing benefits or minimizing costs.