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

question 37

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 is suffering losses and will be shut down immediately; Firm B will be shut down if the price falls any further.
• B)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.
• C)Firm A and Firm B are both earning positive economic profits; new firms will likely enter the industry.
• D)Firm A and Firm B are both suffering economic losses and will soon exit the industry.