Refer to the accompanying figure to answer the following questions. For a firm in a competitive market,the demand curve is horizontal,as shown. -What will happen if the firm offers its product at a price slightly below price P_C? A) The sales volume will plummet to essentially zero. B) The number of units sold will slightly decrease. C) The average total cost will slightly increase. D) The firm will run into high barriers to exit from the market. E) The firm will lose money on each unit sold.

Question

Quizplus · Accepted Answer

Offering a product at a price slightly below the break-even point (P_C) means the firm will be selling each unit at a loss, as the price will not cover the average total cost.

Refer to the Accompanying Figure to Answer the Following Questions