In Long-Run Competitive Equilibrium SRATC = LRATC, Because If SRATC

question 96

Multiple Choice

In long-run competitive equilibrium SRATC = LRATC, because if SRATC > LRATC (at the quantity of output at which MR = MC) firms would

• A)have an incentive to change their plant size to produce their current output.
• B)not be covering their total fixed costs.
• C)not be covering their total variable costs.
• D)a and b
• E)b and c

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Definitions:

External Financing

Funds raised from outside the company, typically through borrowing, issuing equity, or receiving grants, as opposed to internal funds generated from operations.

Full Capacity

The maximum level of output that a company can sustain over a period of time without increasing costs.

Total Assets

The sum of all assets owned by an entity, including both current and non-current assets.

Sustainable Growth Rate

The maximum rate at which a company can grow its earnings without needing to issue new equity or take on additional debt.