Tommy's Tires Operates in a Perfectly Competitive Market

question 10

Multiple Choice

Tommy's Tires operates in a perfectly competitive market.If the market price equals $50 per tire and ATC = $60 per tire at the profit-maximizing level of output,then in the long run

• A)more firms will enter the market
• B)the market supply curve will shift to the right
• C)the equilibrium price per tire will fall
• D)average total costs will rise
• E)the market supply curve will shift to the left

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Definitions:

Reserve Requirements

Mandatory regulations set by central banks determining the minimum amount of reserves that must be held by commercial banks, ensuring they have enough cash on hand to meet withdrawal demands.

Monetary Policy

The process by which a central bank or monetary authority manages the money supply and interest rates to achieve economic objectives.

Interest Rates

The cost of borrowing money, typically expressed as a percentage of the amount borrowed, that borrowers pay to lenders over a specified period.

Money Supply

The sum of all financial resources in the form of cash and deposits in banks present within an economy at a given moment.