Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 14-5. In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn
A)positive profits.
B)zero profits.
C)losses but will remain in business.
D)losses and will shut down.

Question

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-5. In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn
A)positive profits. 
B)zero profits. 
C)losses but will remain in business. 
D)losses and will shut down.

Quizplus · Accepted Answer

In the short run, if the market price is higher than P4 but less than P6, firms will earn positive profits because the price is above the average total cost (ATC) at the profit-maximizing output level.

Figure 14-5 Suppose a Firm Operating in a Competitive Market Has the Has