Asked by Reegan Van Rooyen on Jul 13, 2024
Verified
Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is
A) above $13 but less than $18.
B) anywhere above $13.
C) less than $13 but more than $6.
D) less than $6.
Negative Economic Profit
A situation where a firm's total revenue is less than its total costs, including opportunity costs.
Market Price
The current value at which an asset or service can be bought or sold in a competitive marketplace.
- Evaluate the scenarios leading to positive, zero, or adverse economic returns for a business within a competitive landscape.
Verified Answer
AF
Acheampong FelixJul 18, 2024
Final Answer :
C
Explanation :
A firm will earn a negative economic profit but continue to operate in the short run if the market price covers its variable costs but not its total costs. This typically occurs when the price is above the average variable cost but below the average total cost. The price range given in option C suggests that it covers the firm's average variable costs (indicating operation is feasible) but is below the average total cost (indicating a loss when considering all costs).
Learning Objectives
- Evaluate the scenarios leading to positive, zero, or adverse economic returns for a business within a competitive landscape.