Suppose a Typical Firm in a Competitive Industry Has the Following

question 125

Multiple Choice

Suppose a typical firm in a competitive industry has the following data in the short run: price = $5000; output = 100 000 units; ATC = $4600; AVC =$ 4300.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)The typical firm would shut down,until the remaining firms have a higher price.
• E)There is not enough information to formulate an answer.

---

Definitions:

Investment

The allocation of resources or capital to create profit in the future.

Treasury Bond

Long-term, interest-bearing securities issued by the U.S. government as a means of borrowing money to fund government spending.

Corporate Stock

Represents ownership shares in a corporation, allowing shareholders to claim a portion of the company's profits.

Expected Rate

The projected or anticipated rate of return on an investment over a specific period.