-The Above Figure Shows Three Possible Average Total Cost Curves

question 68

Multiple Choice

-The above figure shows three possible average total cost curves. If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC₀, each produces 20 units, and the market price of the good is $16 per unit, then

• A)the firms make an economic profit of $8 per unit.
• B)firms will enter the industry and the number of firms increases.
• C)the firms' ATC curves will eventually shift to become the same as ATC₁.
• D)firms will exit the industry and the number of firms decreases.
• E)Both answer A and answer B are correct.

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