In the Long Run, If Price Is Less Than Average

question 42

Multiple Choice

In the long run, if price is less than average cost

• A)there is an incentive for firms to exit the market.
• B)there is profit incentive for firms to enter the market.
• C)the market must be in long-run equilibrium.
• D)there is no incentive for the number of firms in the market to change.

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Definitions:

Direct Conversion

The process of changing one form of energy, material, or resource directly into another without intermediate stages.

Variable Overhead

Costs associated with manufacturing that fluctuate with the level of output, such as raw material costs and energy expenses directly tied to production levels.

Overhead Absorption

A method of applying a portion of a company’s indirect costs, such as electricity or rent, to individual units of production.