The Owners Will Shut Down a Perfectly Competitive Firm If

question 469

Multiple Choice

The owners will shut down a perfectly competitive firm if the price of its good falls below its minimum

• A) average total cost.
• B) average marginal cost.
• C) average variable cost.
• D) wage rate.

---

Definitions:

Productively Efficient

This refers to a situation where a firm produces goods at the lowest possible cost.

Allocatively Inefficient

A situation where resources are not allocated to produce the mix of goods and services that most benefits society or meets consumer preferences.

Allocatively Efficient

An allocation status of resources where enhancing the welfare of one party means diminishing that of another.

Productive Inefficiency

A situation where resources are not utilized in the best possible way, leading to wasted potential output or higher costs than necessary.