Since a Competitive Firm Sets MR = P to Determine

question 37

Multiple Choice

Since a competitive firm sets MR = P to determine all quantities in the short run, we can conclude that:

• A) each firm in the industry faces very large fixed costs.
• B) the demand curve faced by each individual competitive firm is perfectly elastic.
• C) the demand curve faced by each individual competitive firm is downward sloping.
• D) the industry demand curve is perfectly elastic.

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Definitions:

Disposable Income

Funds that households can use for saving and expenditures after income taxes are taken out.

APS

Acronym for Average Propensity to Save, which is the ratio of total savings to total income in an economy, indicating how much people save on average per unit of income.

Investment

Assigning financial resources in the hope of creating revenue or gains.

GDP

Stands for Gross Domestic Product, which is the total value of all goods and services produced within a country's borders in a specific time period.