If a Firm in a Perfectly Competitive Industry Experiences Persistent

question 82

Multiple Choice

If a firm in a perfectly competitive industry experiences persistent losses, in the long run it should

• A)shut down temporarily and wait for market conditions to change.
• B)exit the industry.
• C)raise its price to cover average total cost.
• D)continue to operate if it can raise the demand for its product through advertising and quality improvements.

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Definitions:

Societal Loss

Societal Loss pertains to the broader negative impacts or costs borne by society, which can stem from various actions or policies, such as environmental degradation or public health issues.

Demand Schedule

A grid outlining the quantities of an item or service that people are ready and able to buy across a range of prices.

Marginal Cost

The uptick in aggregate cost due to the output of an extra unit of a product or service.

Monopolist

An entity that is the sole provider of a particular product or service in a market, possessing significant market power and control over prices.