Figure 14-6 Suppose a Firm Operating in a Competitive Market Has the Has

question 28

Multiple Choice

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 14-6. Firms will shut down in the short run if the market price

• A)exceeds P3.
• B)is less than P1.
• C)is greater than P1 but less than P3.
• D)exceeds P2.

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Definitions:

AVC

Average Variable Cost, which is the total variable costs of production divided by the quantity of output produced.

MC

MC, or Marginal Cost, is the cost of producing one additional unit of a product, crucial for understanding profit maximization in businesses.

Marginal Revenue

The additional income from selling one more unit of a good; essentially the change in total revenue from an additional unit sold.

Perfect Competition

An idealized market structure in which there are many buyers and sellers, no barriers to entering or exiting the market, and products are identical.