The Graph Shown Displays the Cost Curves for a Firm

question 160

Multiple Choice

The graph shown displays the cost curves for a firm in a perfectly competitive market. Assume that all firms in this market have identical cost structures. Initially the market price is $8. Which of the following statements is true?

• A)The long run equilibrium price will be $6.
• B)Market demand will decrease in the long run.
• C)The long run equilibrium price will be $11.
• D)Market supply will increase in the long run.

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Definitions:

Cash Invested

Money that is put into a business or project with the expectation of generating income or profit.

Accrued Interest

Interest that has accrued but remains unpaid.

Prepaid Insurance

Payments made for insurance services before the coverage period, recorded as an asset initially and expensed over time.

Accrued Revenues

Revenues that have been earned through goods or services delivered, though payment has not yet been received.