In the Short Run, When the Prevailing Market Price Falls

question 7

Multiple Choice

In the short run, when the prevailing market price falls below the average variable cost curve, a firm in perfect competition will shut down because: ​

• A) ​economic profit is zero.
• B) ​price is less than marginal revenue.
• C) ​marginal revenue is insufficient to pay average variable cost.
• D) ​other firms will enter the market seeking profits.

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Definitions:

Utility

In economics, utility refers to the satisfaction or pleasure derived from consuming goods or services.

Marginal Utility

The additional satisfaction or utility a consumer gains from consuming one more unit of a good or service.

Marginal Utility

is the additional satisfaction or benefit a consumer derives from consuming one more unit of a good or service.

Total Utility

The total satisfaction or benefit a person derives from consuming a certain quantity of goods or services.