When a Competitive fiRm's Short-Run Average Total Cost Is Lower

question 51

True/False

When a competitive firm's short-run average total cost is lower than price in the short run, it earns supernormal profits.

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Definitions:

Highly Inelastic

Describes a situation where the demand or supply for a good or service is hardly affected when the price changes.

Highly Elastic

Describes a situation where the demand or supply of a product changes significantly in response to changes in price.

Excise Tax

A tax on the sale or consumption of specific goods or services, such as alcohol or gasoline.

Price Elasticity

A measure of the responsiveness of the quantity demanded or supplied of a good to a change in its price.