Suppose a Typical Competitive Firm Has the Following Data in the Short

question 79

Multiple Choice

Suppose a typical competitive firm has the following data in the short run: price = $10; output =
100 units; ATC = $8; AVC = $7. What will likely happen?

• A) In the long run the industry will expand because of economic profits.
• B) The typical firm would shut down, until the remaining firms have a higher price.
• 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:

Income Statement

A financial statement that shows the company's revenues and expenses over a specific period, leading to its net income or loss.

Net Profit Margin Percentage

A financial metric indicating the percentage of revenue that remains as net income after all expenses are deducted.

Income Statement

A financial document that shows a company's income, expenses, and net profit over a specified period.

Dividend Payout Ratio

The percentage of earnings paid to shareholders in dividends, indicating how much money a company returns to shareholders versus reinvesting in itself.