If a Firm in a Perfectly Competitive Market Is Operating

question 44

Multiple Choice

If a firm in a perfectly competitive market is operating at its profit-maximizing level of output and suddenly faces a reduction in the price it can charge for its product,will the firm suspend operations?

• A)No,because it can always raise its prices in the short run.
• B)No,because it can always raise its prices in the long run.
• C)No,as long as the firm earns sufficient revenue to pay all of the variable costs.
• D)Yes,since it never makes sense to operate at a loss,even in the short run.
• E)No,because it always makes sense to operate at a loss,even in the long run.

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