In the Long Run, Firms in a Competitive Market

question 26

Multiple Choice

In the long run, firms in a competitive market

• A)shut down because profit goes to zero.
• B)lose money.
• C)are not profit maximizing.
• D)earn zero economic profit.

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Definitions:

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, and insurance.

Unit Variable Cost

The cost associated with producing one additional unit of a product, which includes labor, materials, and other variable expenses.

Profit

The financial gain realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Total Costs

The complete sum of all expenses, both fixed and variable, incurred in the production of goods or services.