Under Perfect Competition, the Efficient Level of Output Is Produced

question 101

Multiple Choice

Under perfect competition, the efficient level of output is produced because

• A) government regulates the output level that must be produced.
• B) firms earn only a normal profit in the long run.
• C) firms can earn an economic profit in the long run.
• D) price equals marginal cost.

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Definitions:

Economic Profit

The difference between a firm's total revenue and all costs, including both explicit and implicit costs.

Average Fixed Cost

The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced, which decreases as output increases.

Total Product

The total quantity of output produced by a firm during a given time period with a given amount of inputs.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity supplied by producers.