-The Above Figure Shows Three Possible Average Total Cost Curves

question 271

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 ATC₂, each produces 40 units, and the market price of the good is $20 per unit, then

• A)the firms incur an economic loss of $12 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 D are correct.

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Definitions:

Raw Materials

Fundamental components or substances used at the beginning of the production process to manufacture goods.

Raw Material Costs

The total expense incurred for materials that are used in the production of goods or services.

Beginning Inventory

The value of the total goods available for sale at the start of an accounting period.

Ending Inventory

The worth of products ready for purchase at the conclusion of a financial period, determined by adding the initial inventory to acquisitions and subtracting the cost of goods sold.