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

question 3

Multiple Choice

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

• A) p < AVC for all levels of output.
• B) p < AVC only for the level of output at which p = MC.
• C) p < AVC only if the firm has no fixed costs.
• D) The firm will earn zero profit.

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Definitions:

Empathy

The capability to comprehend and empathize with someone else's emotions.

Displacement

A defense mechanism where negative emotions are redirected from their original source to a safer target.

Catharsis

The act of letting go of, thus offering alleviation from, intense or suppressed feelings.

Perception

The process by which individuals organize and interpret sensory information to give meaning to their environment.