Figure 13-1 Suppose That a Firm in a Competitive Market Has the Has

question 176

Multiple Choice

Figure 13-1
Suppose that a firm in a competitive market has the following cost curves:
-Refer to Figure 13-1.If the market price rises above $6.30,the firm will earn

• A) positive economic profits in the short run.
• B) negative economic profits in the short run but remain in business.
• C) negative economic profits and shut down.
• D) zero economic profits in the short run.

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Definitions:

Capital Goods

Human-made resources (electrical grids, the GPS system, rail networks) used to produce goods and services; goods that do not directly satisfy human wants; also called capital. One of the four economic resources.

Productive Efficiency

A situation in which a good or service is produced at the lowest possible cost and with the optimal combination of inputs.

Coordination Problem

A challenge faced by individuals or organizations when their interests conflict, requiring them to align their actions or decisions to achieve a common goal.

Incentive Problem

A situation where the incentives or motivations available to individuals or firms do not align with broader economic, social, or organizational goals, potentially leading to suboptimal outcomes.