In a Competitive Market the Current Price Is $5

question 419

Multiple Choice

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.50 and AVC = $5.15.

• A)In the short run firms will shut down, and in the long run firms will leave the market.
• B)In the short run firms will continue to operate, but in the long run firms will leave the market.
• C)New firms will likely enter this market to capture any remaining economic profits.
• D)The firm will earn zero profits in both the short run and long run.

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Definitions:

Interval Estimate

Interval Estimate is a range of values used to estimate a population parameter, typically expressed through confidence intervals.

Population Parameter

A value, such as a mean or standard deviation, that describes a characteristic of an entire population.

Normal Distribution

A distribution pattern in probabilities that is balanced around the mean, signifying that data points near the mean have a higher frequency of occurrence compared to those far from the mean.

T Distribution

A probability distribution that arises when estimating the mean of a normally distributed population in situations where the sample size is small and the population standard deviation is unknown.