Figure 14-13 Suppose a Firm in a Competitive Industry Has the Following

question 230

Multiple Choice

Figure 14-13
Suppose a firm in a competitive industry has the following cost curves:

-Refer to Figure 14-13.If the price is P1 in the short run,what will happen in the long run?

• A) Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.
• B) Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.
• C) Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
• D) Because the price is below the firm's average variable costs, the firms will shut down.

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Definitions:

Heart Attack

A medical condition where the blood flow to the heart is suddenly blocked, often by a blood clot.

Hyperlipidemia

A condition characterized by elevated levels of lipids in the blood, increasing the risk of heart disease.

Fatty Substances

Organic compounds that are insoluble in water, such as fats, oils, waxes, and certain vitamins.

Blood

A vital fluid in humans and animals containing red and white cells in a liquid plasma, responsible for transporting nutrients and oxygen to cells and removing waste products.