Joe's Garage Operates in a Perfectly Competitive Market

question 232

Multiple Choice

Joe's Garage operates in a perfectly competitive market.At the point where marginal cost equals marginal revenue,ATC = $20,AVC = $15,and the price per unit is $10.In this situation,

• A)Joe's Garage is earning a positive economic profit.
• B)Joe's Garage should shut down immediately.
• C)Joe's is losing money in the short run, but should continue to operate.
• D)the market price will rise in the short run to increase profits.

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Definitions:

Isotope

Isotopes are variants of a particular chemical element which differ in neutron number, and consequently in nucleon number, but have the same number of protons in their atomic nuclei.

Neutrons

Subatomic particles with no electrical charge, found in the nucleus of an atom, and responsible for much of the mass of atoms.

Isotope

Atoms of the same element that have different numbers of neutrons, resulting in different masses but similar chemical properties.