Which of the Following Statements Best Describes the Price, Output

question 110

Multiple Choice

Which of the following statements best describes the price, output, and profit conditions of competitive price-searcher markets?

• A) Price will equal marginal cost at the profit-maximizing level of output; profits will be positive in the long-run.
• B) Price will always equal average variable cost in the short run and either profits or losses may result in the long run.
• C) Marginal revenue will equal marginal cost at the short run, profit-maximizing level of output; in the long run, economic profit will be zero.
• D) Marginal revenue will equal average total cost in the short run; long-run economic profits will be zero.

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Definitions:

Compound Interest

Interest earned on both the initial principal and the accumulated interest from previous periods on a deposit or loan.

Bond

A financial instrument in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period at a specified interest rate.

Semiannual Interest

Interest that is calculated and paid twice a year, typically used in the context of bonds and loans.

Market Rate

The prevailing price or interest rate at which goods, services, or securities are bought and sold in a competitive marketplace.