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:

Product

A good, idea, method, information, object, or service created as a result of a process and serves a need or satisfies a want.

Elastic Demand

A situation where the quantity demanded of a good or service significantly changes in response to a change in price.

Unitary Elastic

A situation where the percentage change in quantity demanded is equal to the percentage change in price, indicating a proportional relationship.

Video Games

Electronic games that involve user interaction with a user interface to generate visual feedback on a two- or three-dimensional video display device such as a TV screen, computer monitor, or handheld device.