If a Perfectly Competitive Firm in the Short Run Is

question 46

Multiple Choice

If a perfectly competitive firm in the short run is producing where P = ATC = MC,this firm is

• A)at its profit-maximizing output level.
• B)obliged to shut down.
• C)on the downward-sloping portion of its demand curve.
• D)earning economic profits.
• E)incurring losses.

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Definitions:

Binding Price Floor

A minimum price set by the government or body above the equilibrium price, leading to excess supply if the market cannot legally adjust to its equilibrium.

Sellers

Market participants involved in providing goods or services for purchase, playing a key role in the supply side of the economy.

Equilibrium Price

The market price at which the quantity demanded equals the quantity supplied, leading to a stable market condition.

Price Floor

A government- or authority-set minimum price for a particular good or service, designed to protect producers.