Suppose a Typical Competitive Firm Has the Following Data in the Short

question 79

Multiple Choice

Suppose a typical competitive firm has the following data in the short run: price = $10; output =
100 units; ATC = $8; AVC = $7. What will likely happen?

• A) In the long run the industry will expand because of economic profits.
• B) The typical firm would shut down, until the remaining firms have a higher price.
• C) The size of the industry will remain the same in the long run.
• D) In the long run the industry will contract because firms are suffering losses.
• E) There is not enough information to formulate an answer.

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