-The Figure Above Shows a Perfectly Competitive Firm

question 172

Multiple Choice

-The figure above shows a perfectly competitive firm.If the market price is $20 per unit,then the firm produces ________ units and makes an economic profit that is ________.

• A) more than 30; more than $100
• B) 30; more than $100
• C) 20; less than $400
• D) 0; zero
• E) 30; zero

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Definitions:

Perfect Competition

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information.

Inelastic Demand

Demand that responds somewhat, but not a great deal, to changes in price. Inelastic demand always has a numerical value between zero and 1.

Zero Profits

A situation where a firm’s total revenues are exactly equal to its total costs, leading to no net profit or loss.

MC = ATC

This is the point where Marginal Cost equals Average Total Cost, typically illustrating the most efficient scale of production in the short run.