If a Purely Competitive Firm Is Facing a Situation Where

question 42

Multiple Choice

If a purely competitive firm is facing a situation where the price of its product is lower than the average cost, then all of the following apply, except

• A)the firm is suffering losses, and if things are not expected to improve, the firm will leave the industry.
• B)the firm may be earning some accounting profits, but less than what it could earn elsewhere.
• C)other firms will want to enter the industry because of the positive economic profits.
• D)the firm may earn economic profits in the long run if it expands its plant in order to exploit economies of scale.

Comprehend the mechanisms and implications of floating and fixed exchange rates.

Analyze the effects of interest rates and trade policies on currency values and trade balances.

Describe the historical transition from the gold standard to the current system of currency exchange.

Understand the role of supply and demand in determining freely floating exchange rates.

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