Suppose a Perfectly Competitive Firm Faces the Following Situation: P

question 21

Multiple Choice

Suppose a perfectly competitive firm faces the following situation: P = $9; output = 4,000; ATC = $9; AVC = $6; and MC = $9. Which statement accurately describes the firm's and the market's situations?

• A) The firm incurs a normal profit; the market is in a long-run equilibrium.
• B) The firm earns economic profit; the market is in a long-run equilibrium.
• C) The firm incurs losses; the market is in a short-run equilibrium.
• D) The firm earns economic profit; the market is in a short run equilibrium.

---

Definitions:

Profit Sharing

A corporate program where employees receive a share of the company’s profits, typically provided as part of their compensation package.

Individual Incentives

Rewards or bonuses given directly to employees based on their individual performance level, achievements, or outcomes.

Straight Piecework Plan

A compensation system where workers are paid a fixed rate for each unit produced or action completed, encouraging productivity.

Differential Piece Rate Plan

A compensation system where employees are paid based on the quantity of work produced, with different rates applied based on performance levels.