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:

Produce

To create or manufacture goods and services for consumption using labor, materials, and machinery.

Diminishing Returns

Diminishing returns, a concept in economics, occurs when adding an additional factor of production results in a lower increment of output, assuming other factors are constant.

Total Cost

The entire expense of production, incorporating both consistent and fluctuating costs.

Produce

Refers to agricultural products, especially fresh fruits and vegetables, created through farming.