In the Short Run, When the Prevailing Market Price Falls

question 7

Multiple Choice

In the short run, when the prevailing market price falls below the average variable cost curve, a firm in perfect competition will shut down because: ​

• A) ​economic profit is zero.
• B) ​price is less than marginal revenue.
• C) ​marginal revenue is insufficient to pay average variable cost.
• D) ​other firms will enter the market seeking profits.

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Definitions:

Liabilities

Financial obligations or debts owed by a person or company to others.

Taxation Principle

The guidelines governing how taxes should be levied on individuals and businesses in a fair and efficient manner.

Tax Revenue

The income that is gained by governments through taxation from individuals and businesses.

Economic Income

The total value of all income generated by the assets of an individual or organization, including both realized and unrealized gains.