The Figure Given Below Shows the Revenue and Cost Curves

question 2

Multiple Choice

The figure given below shows the revenue and cost curves of a perfectly competitive firm.Figure 10.5
MC: Marginal cost curve
MR: Marginal revenue curve.ATC: Average-total-cost curve
AVC: Average-variable-cost curve
-Why do the perfectly competitive firms earn only normal profits in the long run?

• A)Entry or exit is barred
• B)Firms produce identical products
• C)A large number of buyers and sellers exist in the market
• D)Aggregate demand remains constant
• E)There is free entry and exit of firms

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Definitions:

Tax Revenues

Represents the income that is gained by governments through taxation.

Recession

A phase of short-term economic downturn marked by diminished trade and manufacturing activities, usually recognized by a decrease in GDP for two consecutive quarters.

Automatic Stabilizers

Economic measures and initiatives, like taxation and unemployment insurance, that naturally adapt to mitigate the effects of economic changes without direct action from the government.

Discretionary Fiscal Policy

Changes in government spending and taxes to promote full employment, price stability, and economic growth.