The Following Figure Shows the Marginal Cost Curve and the Average

question 78

Multiple Choice

The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive market. All of the other firms in this market have a cost structure similar to this firm's.

-Refer to the figure above.Suppose the price in this market is $3.We expect ________.

• A) the firms to start exiting this market
• B) the firms start entering this market
• C) no entry or exit in this market
• D) exit from this market, followed by entry of firms into this market

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Definitions:

Economic Benefit

The advantage or gain received from a financial transaction or situation, which may have tax implications or influence fiscal decisions.

Nontaxable Return of Capital

A payment received from an investment that is not taxed because it is considered a portion of the original investment's cost being returned to the investor.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders.

Earnings and Profits

A measure of a corporation’s ability to pay dividends to shareholders, not necessarily equal to net income.