Consider the purely competitive firm pictured below. The firm is earning:
A. Normal profits, since its price is above AVC
B. Economic profits, since its price is above AVC
C. Normal profits, since its price just covers ATC
D. Losses, since it is operating at the shutdown point
C. Normal profits, since its price just covers ATC
You might also like to view...
If the demand for a good is elastic, the price elasticity of demand is ________
A) greater than 1 B) equal to 1 C) between 0 and 1 D) less than zero
Even though fixed costs do not affect the output decision, an increase in fixed costs results in a wider range of prices for which the firm operates at a loss
What will be an ideal response?
Sam quits his job as an airline pilot and opens his own pilot training school. He was earning $40,000 as a pilot. He withdraws $10,000 from his savings where he was earning 6 percent interest and uses the money in his new business. He uses a building he owns as a hangar that he could have rented out for $5,000 per year. He rents a computer for $1,200, buys office supplies for $500, rents an
airplane for $6,000 . pays $1,300 for fuel and maintenance, and hires one worker for $30,000 . Sam's total revenue from pilot training classes this year equaled $90,400 . How did Sam's business do this year? a. Sam realized an economic profit of $3,400 this year. b. Sam realized an economic loss of $3,400 this year. c. Sam realized an economic profit of $5,800 this year. d. Sam realized an economic profit of $3,800 this year. e. Sam realized an economic loss of $3,800 this year.
Unlike a perfectly competitive firm, a monopolistically competitive firm can incur a loss in the long run
a. True b. False Indicate whether the statement is true or false