a) When price exceeds average variable cost for a firm, it is possible that: a.

Question

a) When price exceeds average variable cost for a firm, it is possible that:
a. it is earning an economic profit. b. it is breaking even. c. it is suffering an economic loss.
d. any of the above is true.
b) In short run equilibrium in a perfectly competitive industry whose firms are earning economic profits, a firm:
a. has no incentive to change its output. b. has no incentive to change its plant size. c. has no incentive to expand its factory.
d. has no incentive to leave the industry. e. has no incentive to do any of the above.

Explanation / Answer

1. d. any of the above is true. 2. a. has no incentive to change its output.

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