-The Above Figure Shows a Perfectly Competitive Firm

question 114

Multiple Choice

-The above figure shows a perfectly competitive firm.If the market price is $5 per unit,the firm

• A) will definitely shut down to minimize its losses.
• B) will stay open to produce and will make zero economic profit.
• C) will stay open to produce and will incur an economic loss.
• D) will stay open to produce and will make an economic profit.
• E) might shut down but more information is needed about the fixed cost.

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Definitions:

Units Produced

The total quantity of finished goods manufactured by a company during a specific period.

Horizontal Axis

In graphing, it is the x-axis, representing the independent variable or the base line against which other variables are measured.

Fixed Cost

Costs that remain constant regardless of production or sales volumes, including expenditures like rent, salaries, and insurance.

Variations in Volume

Changes in the amount of output produced or sold, affecting costs and revenue.