A Perfectly Competitive Firm That Should Not Shut Down in the Short

question 162

Multiple Choice

A perfectly competitive firm that should not shut down in the short run will maximize profit where

• A)VC = 0
• B)FC = 0
• C)AFC = MC
• D)P = MC
• E)ATC = 0

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Definitions:

Minimum Required Rate

The lowest acceptable return on an investment, determined by the investor's risk tolerance and alternative investment options.

Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment’s initial cost.

Residual Income

The amount of income that an entity generates after accounting for the cost of capital, indicating profitability beyond the minimum required return.

Investment Opportunity

A potential financial venture or asset that could generate income or appreciate in value over time.