The Figure Given Below Shows the Demand and Cost Curves

question 18

Multiple Choice

The figure given below shows the demand and cost curves of a perfectly competitive firm.Figure: 10.4
D: Demand curve
MC: Marginal cost curve
ATC: Average-total cost curve
AVC: Average-variable-cost curve
-Suppose a firm in a perfectly competitive market is operating at its profit-maximizing level of output. Will the firm suspend operations if it faces a reduction in the price it can charge for its product?

• A)No, because it can always raise its prices in the short run.
• B)No, because it can always raise its prices in the long run.
• C)No, as long as the firm earns sufficient revenue to pay all of the variable costs.
• D)Yes, since it never makes sense to operate at a loss, even in the short run.
• E)No, because it always makes sense to operate at a loss, even in the long run.

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Definitions:

Phloem

The vascular tissue in plants responsible for the transport of nutrients such as sugars from the leaves to other parts of the plant.

Annual Rings

Concentric rings visible in the cross-section of a tree trunk representing a year's worth of growth; used to estimate age and historical climate conditions.

Tropical Rain Forest

A dense, warm, wet forest biome located near the equator, known for its high biodiversity and as the habitat for half of the Earth's plant and animal species.

Outward-Facing

Directed towards the exterior or outside of something.