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If a Competitive Firm Finds That It Maximizes Short-Run Profits

question 3

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If a competitive firm finds that it maximizes short-run profits by shutting down,which of the following must be TRUE?


Definitions:

Consumer Surplus

The disparity between what consumers are ready and able to spend for a product or service and the amount they end up paying.

Price

The financial expenditure involved in obtaining a product or service.

Competitive Industry

An industry characterized by many firms, free entry and exit, and a product for which every seller is a price taker.

Perfectly Elastic

A situation in which the quantity demanded or supplied changes infinitely in response to any change in price, represented by a horizontal demand or supply curve.

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