Competitive Firms Are Most Likely to Exist When Average Cost

question 16

Multiple Choice

Competitive firms are most likely to exist when average cost curves:

• A)are U- shaped and achieve their minimum at relatively small output.
• B)are horizontal.
• C)are U- shaped and achieve their minimum at relatively large output.
• D)are upward sloping.

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Definitions:

Long-Run Aggregate Supply

The total amount of goods and services produced in an economy at full employment, unaffected by price levels in the long term.

Nominal Wage

The wage that is paid to workers in current dollars, without adjustment for inflation.

Capital Stock

The total amount of physical, human, and intellectual capital that a country possesses at any given time.

Beneficial Supply Shock

An unexpected event that increases the production capacity and decreases the prices of goods and services.