If a Perfectly Competitive Firm's Average Total Cost Is Less

question 14

Multiple Choice

If a perfectly competitive firm's average total cost is less than the price,then the firm

• A) incurs an economic loss.
• B) makes an economic profit.
• C) makes zero economic profit.
• D) makes either zero economic profit or an economic profit depending on whether the marginal revenue is equal to or greater than the price.
• E) None of the above answers is correct because the relationship between the price and average total cost has nothing to do with the firm's profit.

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Definitions:

Minimum Acceptable Price

The lowest price at which a seller is willing to sell a product or service, often covering at least the cost of production.

Consumer Surplus

The discrepancy between the aggregate amount consumers are willing to expend on a good or service and the aggregate amount they really expend.

Total Revenues

The complete amount of income generated by a company through its various business activities.

Market Supply Curve

A graphical representation that shows the relationship between the price of a good and the total output that producers are willing and able to sell at that price.