A Firm in a Competitive Market Has the Following Cost

question 147

Multiple Choice

A firm in a competitive market has the following cost structure:

If the market price is $4,this firm will

• A) produce two units in the short run and exit in the long run.
• B) produce three units in the short run and exit in the long run.
• C) produce four units in the short run and exit in the long run.
• D) shut down in the short run and exit in the long run.

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Definitions:

Required Return

The minimum return an investor expects to achieve by investing in a particular asset, reflecting the risk associated with the investment.

Net Cash Flows

The difference between a company's cash inflows and outflows in a given period, indicative of its financial health.

Capital Budgeting

The process of evaluating and selecting long-term investments consistent with the firm's goal of wealth maximization.

Net Cash Flows

The difference between cash inflows and outflows during a specific period, reflecting the company's financial health.