In a Perfectly Competitive Market, If Price Is Less Than

question 44

Multiple Choice

In a perfectly competitive market, if price is less than average total cost, but greater than average variable cost at the level of output where marginal cost equals marginal revenue:

• A)the firm is earning positive economic profit.
• B)the firm is earning negative economic profit.
• C)the firm should shut down.
• D)we cannot determine whether the firm is earning positive or negative profits.

---

Definitions:

Accounting

The systematic process of recording, measuring, and communicating financial information about economic entities.

Recording

The act of documenting financial transactions in the books of accounts as part of the accounting process.

Transactions

Financial events that affect the assets, liabilities, or equity of a company, recorded in its accounting system.

Accounting

The systematic process of recording, measuring, and communicating information about financial transactions.