-Use the Figure Above to Answer This Question

question 4

Multiple Choice

-Use the figure above to answer this question. Consider a perfectly competitive firm in a short-run equilibrium. Figure ________ shows a firm in bad times because the firm makes a(n) ________.

• A) A; economic loss of $4 so it must close
• B) C; normal profit and can stay open in the long run
• C) B; economic loss of $3 per unit
• D) B; economic profit because the price exceeds average variable cost
• E) A; economic loss of $4 per unit if the firm decides to operate

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Definitions:

Income

The amount of money received by an individual or entity, usually in exchange for labor or services, or through returns on investments.

Utility Function

A mathematical representation in economics that quantifies the satisfaction or happiness derived by a consumer from consuming goods and services.

Substitution Effect

The economic principle that as the price of a good rises, consumers will replace it with cheaper alternatives.

Income

The financial gain received by an individual or entity, typically through wages, investments, or business operations.