If Firms Are Producing at a Profit-Maximizing Level of Output

question 121

Multiple Choice

If firms are producing at a profit-maximizing level of output where the price is equal to the average total cost:

• A)accounting profits may be negative.
• B)accounting profits must be zero.
• C)economic profits may be positive.
• D)economic profits must be zero.

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Definitions:

Quantity-fixing Agreements

involve deals or arrangements between competing businesses to restrict output levels, aiming to influence market prices or conditions.

Price-leadership Model

A market strategy where one dominating firm sets the price for its product, and other firms in the industry follow suit, often observed in oligopolistic markets.

Dominant Firm

A company that has a large portion of market share in its industry, giving it significant power to influence market conditions and prices.

Economic Incentives

Monetary or other rewards used to motivate individuals or entities to perform certain actions beneficial to economic objectives.