Which of the Following Statements Is TRUE

question 89

Multiple Choice

Which of the following statements is TRUE?

• A) The presence of positive economic profit in a perfectly competitive market is consistent with the characteristics of a long-run competitive equilibrium.
• B) When firms in a perfectly competitive market incur economic losses, some will exit in the long run, thereby shifting the industry supply curve rightward.
• C) If a profit-maximizing firm in a perfectly competitive market is making an economic profit, then it must be producing at a level of output where price is greater than average total cost.
• D) If a profit-maximizing firm in a perfectly competitive market is incurring an economic loss, then it must be producing at a level of output where price is greater than average total cost.

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Definitions:

Marginal Revenue

The augmented income from the sale of one more unit of a good or service.

Pure Competition

A market structure characterized by a large number of buyers and sellers, free entry and exit, and a homogeneous product, leading to price taking behavior.

Competitive Firm

A business that competes in a market where it has some influence on the prices of its products or services but faces competition from other firms.