Suppose a Typical Firm in a Competitive Industry Has the Following

question 53

Multiple Choice

Suppose a typical firm in a competitive industry has the following data in the short run: price = $6; output = 100 units; ATC = $8; AVC = $7.What will likely happen in the long run?

• A)The typical firm would shut down,until the remaining firms have a higher price.
• B)In the long run the industry will expand because firms are earning economic profits.
• C)The size of the industry will remain the same in the long run.
• D)In the long run the industry will contract because firms are suffering losses.
• E)There is not enough information to formulate an answer.

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Definitions:

Direct Product Cost

Costs that can be directly attributed to the production of specific goods or services, including materials and labor.

Advertising Campaign

An advertising campaign is a series of advertisement messages that share a single idea and theme which make up an integrated marketing communication (IMC).

Chocolate Covered Almonds

A confectionery product consisting of almonds coated in chocolate, often served as a sweet snack.

Manufacturing Costs

Expenses directly associated with the production of goods, including materials, labor, and factory overhead.