Suppose a Typical Firm in a Competitive Industry Has the Following

question 10

Multiple Choice

Suppose a typical firm in a competitive industry has the following data in the short run: price = $5000; output = 1 million units; ATC = $5300; AVC = $4750.What will likely happen in the long run?

• A)In the long run the industry will expand because firms are earning economic profits.
• B)In the long run the industry will contract because firms are suffering losses.
• C)The size of the industry will remain the same in the long run.
• D)Consumers will avoid this industry because firms are suffering losses.
• E)There is not enough information to formulate an answer.

---

Definitions:

Just Compensation

The fair market value that must be paid for property taken by the government through eminent domain.

Commercial Speech

Speech that promotes a commercial transaction, or advertisement, which is granted protection under the First Amendment but is subject to regulation.

First Amendment

The first addition to the U.S. Constitution, guaranteeing freedoms concerning religion, expression, assembly, and the right to petition.

Misleading

Providing false or inaccurate information that causes someone to believe something that is not true or does not present the full truth.