Suppose the Price of an Item in a Perfectly Competitive

question 2

Multiple Choice

Suppose the price of an item in a perfectly competitive market is $2. For a firm in this market, MC = MR at an output of 100 units. The average total cost at this output level is $4 per unit, and TVC is $80. We may conclude that

• A) the firm should shut down because TC > TR.
• B) the firm should continue to produce because P>AVC.
• C) the firm should shut down because its TFC is $320 and its TC is $400.
• D) the firm should shut down because other firms will enter the industry as the market is perfectly competitive.

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Definitions:

-mania

A suffix used to denote an obsession with or excessive enthusiasm for a particular thing or topic.

-plasm

A suffix used in biology to denote a formative or molded substance, such as cytoplasm.

Formed

The past participle of form, indicating something that has been brought into existence or given a specific shape.

Compound Suffix

A suffix consisted of more than one element, used in the creation of complex words, especially in the construction of scientific terminology.