A Perfectly Competitive Firm Will Shut Down in the Short

question 179

True/False

A perfectly competitive firm will shut down in the short run when marginal revenue equals marginal cost at a price less than minimum average variable cost.

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Definitions:

Income Elasticity

A measurement of how the demand for a good or service changes in response to changes in consumers' income levels.

Recession

A period of economic decline across an economy lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Demand

Refers to the desire and willingness of consumers to purchase goods and services at different prices.

Income Elasticity of Demand

An indicator of the variation in the demand for a product as a result of changes in the income levels of consumers.