-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:

Preincorporation Share Subscription

An agreement by an investor to purchase shares in a corporation that is yet to be formed, often used to fund the creation of the new company.

Model Business Corporation Act

A set of model laws designed to standardize and simplify the legal structure of corporations across the United States.

Ratifies

The act of officially confirming or endorsing a decision, making it formally valid.

Adoption

In corporation law, a corporation’s acceptance of a preincorporation contract by action of its board of directors, by which the corporation becomes liable on the contract.