If a Purely Competitive Firm Is Currently Facing a Situation

question 51

Multiple Choice

If a purely competitive firm is currently facing a situation where the price of its product is lower than the average variable cost, but it believes that the market demand for its product will increase soon, then

• A)the firm will produce a low level of output in the short run and leave the industry in the long run.
• B)the firm will shut down in the short run and leave the industry in the long run.
• C)the firm will produce a low level of output in the short run but expand its plant in the long run as demand increases.
• D)the firm will shut down in the short run, but stay in the industry in the long run if it expects the product price to rise high enough soon.

---

Definitions:

Nonjudgmental

An attitude or approach that refrains from forming a critical opinion or conclusion about something or someone.

Parietal Hemineglect

A neurological condition resulting from damage to the parietal lobe, characterized by the inability to perceive or attend to stimuli on one side of the body or space.

Right Arm

This refers to the limb on the right side of the body extending from the shoulder to the hand.

Illusory Conjunction

A cognitive phenomenon where features from multiple objects are incorrectly perceived as being combined into a single object.