Suppose That Competitive Price-Searcher Firms Are Experiencing Losses

question 126

Multiple Choice

Suppose that competitive price-searcher firms are experiencing losses. In the transition from this initial situation to a long-run equilibrium,

• A) the number of firms in the market decreases.
• B) each existing firm experiences a decrease in demand for its product.
• C) each firm experiences an upward shift to its marginal cost and average total cost curves.
• D) each existing firm's average total cost falls to bring economic profit back to zero.

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Definitions:

Break Even Point

The financial analysis term where total revenues equal total expenses, and there is no profit or loss.

Budgeted Revenue

The amount of income that a company plans or expects to generate over a certain period, often used for planning and performance evaluation purposes.

After-Tax Profit

The net income a company generates after all taxes have been deducted from total revenues.

Tax Rate

The rate at which taxes are levied on an individual or a corporation's income.