Use the Figure Below to Answer the Following Questions

question 103

Multiple Choice

Use the figure below to answer the following questions.

Figure 12.4.3
-Refer to Figure 12.4.3, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. Firms are

• A)making an economic profit, and some firms leave the market. Market supply decreases.
• B)making an economic profit, and some firms enter the market. Market supply increases.
• C)incurring an economic loss, and some firms leave the market. Market supply decreases.
• D)incurring an economic loss, and some firms enter the market. Market supply increases.
• E)incurring an economic loss, but since they are covering average variable cost, no one will exit the market in the long run.

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Definitions:

Financial Crisis

A situation where the value of financial institutions or assets drops rapidly, leading to a loss of confidence, insolvencies, and liquidity shortages.

Collateralized Debt Obligations

A type of structured asset-backed security (ABS) with multiple layers of debt obligations typically secured by a pool of loans or other assets.

Promissory Note

A financial instrument comprising a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Financial Asset

An intangible asset representing a claim on future benefits or returns, examples include stocks, bonds, and bank deposits.