Which of the Following Is True of Perfectly Competitive Firms

question 138

Multiple Choice

Which of the following is true of perfectly competitive firms?

• A)For a perfectly competitive firm, as long as the price derived from expanded output exceeds the marginal cost of that output, the expansion of output creates additional economic profits.
• B)Producing at the profit-maximizing output level means that a firm is actually earning economic profits.
• C)A competitive firm earning zero economic profit will be unable to continue in operation over time.
• D)A perfectly competitive firm will operate in the short run only at price levels greater than or equal to average total costs.
• E)As new firms enter an industry where sellers are earning economic profits, the result will include an increase in the equilibrium price.

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Definitions:

Popular Culture

The beliefs, practices, and objects that are part of everyday traditions.

Corporations

Legal entities that are separate from their owners, with the ability to own assets, incur liabilities, and engage in contracts or legal actions.

Protestantism

A branch of Christianity that originated with the Reformation, a movement against what its followers perceived as errors in the Roman Catholic Church.

Capitalism

An economic system characterized by private ownership of the means of production, the operation for profit, and market competition.