Consider the Following Cost Curves for Firm X,a Perfectly Competitive

question 70

Multiple Choice

Consider the following cost curves for Firm X,a perfectly competitive firm.
FIGURE 9- 5
-Refer to Figure 9- 5.In this industry,which one of the following is FALSE?

• A)Only one firm can reach the size of output Q2.
• B)If the scale of Firm X at output Q2 and price P2 is large enough that Firm X has an appreciable share of the market,Firm X will no longer be a price taker.
• C)At output Q2 and price P2,Firm X is maximizing its long- run profits.
• D)If the price were to fall below P2,firms would leave the industry.
• E)If the price were to rise above P2,new firms would enter the industry.

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Labor

The body of persons engaged in work or employment, especially manual or physical work.

Materials

The physical substances from which objects are made, available in different forms and used for various purposes in production.

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including examples like rent, wages, and insurance premiums.