Figure 13-5 Suppose a Firm Operating in a Competitive Market Has the Has

question 388

Multiple Choice

Figure 13-5
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 13-5.In the short run,if the market price is higher than P1 but less than P4,individual firms in a competitive industry will earn

• A) positive profits.
• B) zero profits.
• C) losses but will remain in business.
• D) losses and will shut down.

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Definitions:

Over-Optimism

A bias in judgment or planning that causes people to overestimate the likelihood of positive outcomes.

Reasoning Errors

Mistakes in logic or judgement that can lead to incorrect conclusions or decisions.

Financial Decisions

involve the process of making choices regarding investments, budgeting, savings, and spending, affecting an individual's or entity's financial health.

Myopic Loss Aversion

The behavioral finance theory suggesting that investors are more sensitive to losses than to gains, influencing shorter-term investment decisions adversely.