Consider the Following Cost Curves for Two Perfectly Competitive Firms,A

question 39

Multiple Choice

Consider the following cost curves for two perfectly competitive firms,A and B.
FIGURE 9- 3
-Refer to Figure 9- 3.Firms A and B are in the same industry.Choose the statement that best describes the situation facing the two firms.

• A)Firm A and Firm B are both earning positive economic profits; new firms will likely enter the industry.
• B)Firm A is suffering losses and will be shut down immediately; Firm B will be shut down if the price falls any further.
• C)Firm A is making losses but remains producing as long as price falls no further; Firm B is producing at lower cost and is earning economic profits.
• D)Firm A and Firm B are both suffering economic losses and will soon exit the industry.

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Definitions:

Demand Equals

A condition where the quantity of a good or service demanded by consumers matches the quantity supplied at the current price.

Average Total Cost

The total cost divided by the quantity produced, representing the cost of producing each unit of output.

Long Run

A period in which all factors of production and costs are variable, allowing full adjustment to changes.

Demand Equals

A state in a market where the quantity of a good or service desired by buyers is equal to the quantity supplied by sellers, resulting in market equilibrium.