Asked by Potenza Building Mtrl on Jun 23, 2024
Verified
In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit (or not enter) the market.
Average Total Cost
The total cost of production divided by the quantity produced, representing the average cost of producing each unit of output.
Competitive Market
A market structure characterized by a large number of sellers and buyers, where no single entity can significantly influence prices, leading to optimal product pricing and variety.
- Detail the interplay among market price, average total cost, and firm activities in both immediate and extended timeframes.
- Gain insights into the influence of market entry and exit processes on achieving equilibrium in a competitive environment.
Verified Answer
VS
Victoria ShremJun 27, 2024
Final Answer :
True
Explanation :
If the price is less than the average total cost for all possible levels of production, the firm cannot cover its costs in the long run, leading it to exit (or not enter) the market to avoid losses.
Learning Objectives
- Detail the interplay among market price, average total cost, and firm activities in both immediate and extended timeframes.
- Gain insights into the influence of market entry and exit processes on achieving equilibrium in a competitive environment.
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