Suppose a Typical Firm in a Competitive Industry Has the Following

question 153

Multiple Choice

Suppose a typical firm in a competitive industry has the following data in the short run: price = $4000; output = 1 million units; ATC = $4000; AVC = $3500.What will likely happen in the long run?

• A)In the long run the industry will expand because firms are earning economic profits.
• B)In the long run the industry will contract because firms are suffering losses.
• C)The size of the industry will remain the same in the long run.
• D)The typical firm would shut down,until the remaining firms have a higher price.
• E)There is not enough information to formulate an answer.

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