If a Competitive Firm Cannot Earn Profit at Any Level

question 97

Multiple Choice

If a competitive firm cannot earn profit at any level of output during a given short-run period,then which of the following is LEAST likely to occur?

• A) It will shut down in the short run and wait until the price increases sufficiently.
• B) It will exit the industry in the long run.
• C) It will operate at a loss in the short run.
• D) It will minimize its loss by decreasing output so that price exceeds marginal cost.

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Definitions:

Risky Asset

An asset that has a significant degree of uncertainty in its returns, often leading to higher potential rewards and higher potential losses.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how much the individual data points differ from the mean.

Expected Rate

The anticipated return on an investment, factoring in the probability of various outcomes, including risks and rewards.

T-bill

Short for Treasury bill, a short-term government security issued at a discount from the par value and pays no interest before maturity, but is redeemed at its face value.