If a Competitive Firm in the Short Run Finds That

question 321

Multiple Choice

If a competitive firm in the short run finds that its average total cost exceeds its price, the firm

• A) experiences an economic loss.
• B) should shut down.
• C) should exit the industry.
• D) experiences an economic profit.

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Definitions:

Operating Activities

Operating activities involve the day-to-day functions of a business directly related to its provision of goods and services.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Cash Dividends

The distribution of profits by a corporation to its shareholders in the form of cash.

Statement of Cash Flows

A financial report that shows how changes in balance sheet accounts and income affect cash and cash equivalents, dividing activities into operating, investing, and financing activities.