Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
-Refer to Figure 14-1. If the market price is $5.00, the firm will earn
A)positive economic profits in the short run.
B)negative economic profits in the short run but remain in business.
C)negative economic profits and shut down.
D)zero economic profits in the short run.

Question

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 14-1. If the market price is $5.00, the firm will earn
A)positive economic profits in the short run. 
B)negative economic profits in the short run but remain in business. 
C)negative economic profits and shut down. 
D)zero economic profits in the short run.

Quizplus · Accepted Answer

If the market price is $5.00 and the firm is covering its variable costs but not its total costs, it will incur negative economic profits but may continue operating in the short run to cover some fixed costs.

Figure 14-1 Suppose That a Firm in a Competitive Market Has the Has