-The Above Figure Shows a Perfectly Competitive Firm

question 98

Multiple Choice

-The above figure shows a perfectly competitive firm. If the market price is $15 per unit, the firm

• A) will definitely shut down to minimise its losses.
• B) will stay open to produce and will make zero economic profit.
• C) will stay open to produce and will incur an economic loss.
• D) will stay open to produce and will make an economic profit.
• E) might shut down but more information is needed about the fixed cost.

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Definitions:

Equilibrium

An equilibrium where demand from the market matches its supply, stabilizing prices as a consequence.

Substitute

A product or service that can be used in place of another to satisfy the same needs or desires.

Margarine

A spread used for flavoring, baking, and cooking, made primarily from vegetable oils as an alternative to butter.

Demand Curve

The demand curve is a graphical representation that shows the relationship between the price of a good or service and the quantity demanded by consumers.