If in a Perfectly Competitive Market, Firms Are Facing a Price

question 263

Multiple Choice

If in a perfectly competitive market, firms are facing a price below their average total cost but above average variable cost at the profit-maximizing output, then

• A)the industry supply will not change.
• B)new firms are attracted to the industry.
• C)some existing firms will exit the industry.
• D)firms are breaking even.

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Definitions:

Liquidity Ratio

A financial measure used to determine a company's ability to cover its short-term obligations with its most liquid assets.

Financial Obligations

Commitments to pay money to another party, including debts, salaries, taxes, and other liabilities.

Acid-Test Ratios

A financial metric that evaluates a company's ability to pay off its short-term liabilities with its quick assets, providing insight into its short-term financial health.

Liquidity Ratios

Financial metrics used to determine an organization's ability to pay off its short-term debts with its liquid assets.