-The Above Figure Shows Three Possible Average Total Cost Curves

question 142

Multiple Choice

-The above figure shows three possible average total cost curves.If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC0,each produces 20 units,and the market price of the good is $16 per unit,then

• A)the firms make an economic profit of $8 per unit.
• B)firms will enter the industry and the number of firms increases.
• C)the firms' ATC curves will eventually shift to become the same as ATC1.
• D)firms will exit the industry and the number of firms decreases.
• E)Both answers A and B are correct.

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Definitions:

Brand Equity

The value and strength of a brand that arises from consumer perception, recognition, and loyalty, influencing their purchasing behavior.

Repeat Purchasing

The act by consumers of buying the same product or service again, indicating satisfaction and loyalty towards the brand.

Competitive Environment

A market scenario where businesses are in competition with each other to attract customers and achieve higher sales.

Free Association

A psychological technique in which a person responds to a word or idea spontaneously with the first word or idea that comes to mind.