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

question 305

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 $3.50 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:

Gaining Confidence

The process of building belief or trust in one's abilities, qualities, and judgment.

Inspirational Appeals

Motivational messages or gestures aimed at inspiring or energizing individuals or groups towards a particular action or behavior.

Emotional Appeals

Persuasion techniques aimed at eliciting emotional responses from the audience to influence attitudes, beliefs, or behaviors.

Power Bases

The sources of authority or influence that individuals or groups possess in a social or organizational context.