Asked by Maanasi Radhakrishnan on Jul 29, 2024
Verified
Profit-maximizing firms enter a competitive market when existing firms in that market have
A) total revenues that exceed fixed costs.
B) total revenues that exceed total variable costs.
C) average total costs that exceed average revenue.
D) average total costs that are less than market price.
Competitive Market
A marketplace setup where there are numerous buyers and sellers, ensuring that no single participant has the power to control prices or the state of the market.
Average Total Costs
The total cost of production (fixed plus variable costs) divided by the quantity of output produced.
Market Price
The present rate at which a service or asset is available for purchase or sale in a specific market.
- Gaining insight into the factors influencing company decisions to join or withdraw from the market through profit and cost evaluations.
Verified Answer
ZK
Zybrea KnightAug 04, 2024
Final Answer :
D
Explanation :
Profit-maximizing firms are more likely to enter a market when existing firms are making a profit, which occurs when the price (or average revenue) is higher than the average total costs. This condition indicates that firms can cover all their costs and have room for profit, making the market attractive for new entrants.
Learning Objectives
- Gaining insight into the factors influencing company decisions to join or withdraw from the market through profit and cost evaluations.