If a Perfectly Competitive Firm Is Producing Where Its MR=MC

question 73

Multiple Choice

If a perfectly competitive firm is producing where its MR=MC, but is operating to the left of the minimum point of its LRAC curve,

• A) it can still be in long- run equilibrium as long as P = SRATC.
• B) it cannot be optimizing its short- run behaviour.
• C) it is in a long- run profit maximizing position.
• D) it can reduce its average costs by building a larger plant.
• E) its profits will decrease if it builds a larger plant.

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Definitions:

Corporate Bonds

Debt securities issued by corporations to finance their operations, investments, and other expenditures, paying periodic interest payments to bondholders.

Long Term Bonds

Debt securities with a maturity date longer than ten years, offering investors fixed interest payments.

Interest Rate Sensitivity

A measure of how the price of a financial asset changes in response to changes in interest rates.

Double Digit Yields

Interest or dividend rates that are in the double digits percentage-wise, indicating high returns on investment but typically with higher risk.