If the Price Is Less Than a Perfectly Competitive Firm's

question 253

Multiple Choice

If the price is less than a perfectly competitive firm's minimum average variable cost,the firm

• A) makes an economic profit.
• B) operates and incurs an economic loss equal to total fixed cost.
• C) operates and incurs an economic loss equal to average variable cost.
• D) shuts down and incurs an economic loss equal to total fixed cost.
• E) shuts down and incurs an economic loss equal to average variable cost.

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Definitions:

Retained Earnings

The portion of a company's profits that is kept or retained and not paid out as dividends to shareholders, often used for reinvestment in the business or to pay down debt.

Equity Method

An accounting approach for recording investments in other entities, where the investment's value is adjusted based on the investor's share of the investee's profits or losses.

Dividends

Payments made by a corporation to its shareholder members, distributed from the company's profits.

Investment

The allocation of resources, usually financial, in expectation of a future return.