If Price Remains Above the Average Total Cost for Firms

question 30

Multiple Choice

If price remains above the average total cost for firms in a competitive industry:

• A)existing firms will exit that industry.
• B)new firms will enter that industry.
• C)the number of firms in the industry will neither increase nor decrease.
• D)the existing firms will be making zero economic profit.

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Definitions:

Expected Costs

The anticipated expenses associated with the production of goods or services or the undertaking of an activity, based on historical data, trends, and analysis.

Economic Profit

The contrast between earnings from outputs sold and the opportunity cost of using specific inputs.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the outstanding loan.

Interest Rate

The percentage of a loan amount charged by the lender to the borrower for the use of assets, expressed as an annual percentage of the principal.