If a Competitive Firm Cannot Earn a Profit at Any

question 73

Multiple Choice

If a competitive firm cannot earn a profit at any level of output during a given short-run period, then which of the following is FALSE?

• A)It will shut down in the short run and wait until the price increases sufficiently.
• B)It will exit the industry in the long run.
• C)It will operate at a loss in the short run.
• D)It will minimize its loss by decreasing output so that price exceeds marginal cost.

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Definitions:

Current Ratio

A financial ratio indicating a firm's capacity to settle short-term debts or liabilities due within the next 12 months.

Horizontal Analysis

A financial analysis technique comparing historical data, such as revenues or profits, over a series of periods to identify trends or patterns.

Trend Analysis

The practice of collecting information and attempting to spot a pattern, often used in financial markets or to analyze business data.

Net Income

The total profit or loss of a company after all revenues and expenses have been accounted for.