In the Short Run,a Competitive Firm May Choose to Operate

question 164

Multiple Choice

In the short run,a competitive firm may choose to operate at a loss

• A) to ensure that other firms make a loss as well.
• B) only if those losses are economic losses.
• C) to gain market power in the future.
• D) only if those losses are accounting losses.
• E) to recover a portion of its fixed costs.

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Definitions:

Consumer Surplus Loss

The reduction in consumer surplus due to changes in market conditions such as price increases or decreases in available goods.

Individual Seller

A single entity or person engaged in the act of selling goods or services, typically on a small scale or directly to consumers.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, due to higher market price.

Individual Producer Surplus

The net gain to an individual seller from selling a good; equal to the difference between the price received and the seller’s cost.