Asked by Mariela Nieto on Jul 26, 2024
Verified
Refer to Figure 14-1. If the market price is exactly $13, 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.
Economic Profits
Profits calculated by subtracting both explicit and implicit costs from total revenues, representing the additional income earned over and above the opportunity costs.
Competitive Market
A market structure characterized by a large number of buyers and sellers, free entry and exit, and a product for which each seller offers an identical product.
Market Price
Market price is the current price at which an asset or service can be bought or sold in a given market.
- Ascertain the factors influencing whether businesses achieve zero, positive, or negative economic outcomes.
Verified Answer
DI
Daniella IpsaridesJul 27, 2024
Final Answer :
D
Explanation :
At a market price of $13, the firm's average total cost (ATC) is also $13, meaning the firm is covering all its costs, including the normal profit (opportunity cost of capital). Therefore, it earns zero economic profits in the short run.
Learning Objectives
- Ascertain the factors influencing whether businesses achieve zero, positive, or negative economic outcomes.