In Short-Run Competitive Equilibrium, Which of the Following Is Always

question 168

Multiple Choice

In short-run competitive equilibrium, which of the following is always true?

• A) ​Profit equals zero.
• B) ​Profit can be negative, zero, or positive.
• C) ​Profit can be zero or positive, but not negative.
• D) ​Profit is positive, otherwise firms would not produce. ​

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Definitions:

Utility Maximizes

The behavior of consumers to obtain the greatest satisfaction from their choices, given their resources.

Substitution Effect

The change in demand for a good or service caused by a change in its price, making consumers choose alternatives.

Budget Constraints

The limitations on the spending behavior of consumers based on their income and the prices of goods and services, determining the possible combinations of goods and services they can afford.

Substitution Effect

The economic understanding that as prices rise or incomes decrease, consumers will replace more expensive items with less costly alternatives.