Consider the Following Cost Curves for Firm X, a Perfectly

question 121

Multiple Choice

Consider the following cost curves for Firm X, a perfectly competitive firm. FIGURE 9- 3
-Refer to Figure 9- 3. If Firm X has a capital stock that generates SRATC1, then in the long run Firm X will have to

• A) maintain its output level at Q1, because it is maximizing its short- run profits.
• B) set its output at Q1 with an expanded plant size.
• C) set its output at Q1 with the existing plant size.
• D) expand its output to Q2 with the existing plant size.
• E) either expand its plant size or exit from the industry.

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Definitions:

Patents

Intellectual property rights granted to an inventor, providing exclusive rights to use, sell, or manufacture the invention for a certain period.

Equipment

Tangible personal property used in operations, such as machinery or office hardware, that is not intended for sale.

Acquisition Differential

The difference between the cost of an acquisition and the fair value of net assets acquired, often recognized as goodwill on the balance sheet.

Patents

Legal rights granted by a government to an inventor for a limited time, giving exclusive rights to manufacture, use, or sell an invention.