Which of the Following Is True of a Perfectly Competitive

question 138

Multiple Choice

Which of the following is true of a perfectly competitive firm?

• A) The firm is a price maker.
• B) If the firm wishes to maximize profits it will produce an output level in which total revenue equals total cost.
• C) The firm will not earn an economic profit in the long run.
• D) The firm's short-run supply curve is its MC curve below its AVC curve.

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Definitions:

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount that they actually do pay.

Third-Degree Price Discrimination

Practice of dividing consumers into two or more groups.

Price Elasticities

Measures of how the quantity demanded or supplied of a good responds to a change in its price.

Marginal Revenue

The additional income gained from selling one more unit of a product or service.