Assume that at the current market price, a perfectly competitive firm's profit-maximizing level of output yields total revenues that are just equal to total costs. Which of the following statements applies to this firm?
A) The firm should shut down right now.
B) The firm should continue to operate in the short run to minimize losses, but shut down if things don't improve over the long run.
C) The firm is earning zero economic profit and should continue to operate.
D) The firm should increase its explicit costs to reduce its tax burden.
C
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Amanda, age 6, opens a lemonade stand. She makes all the lemonade from a mix she found in her parents' pantry. Her stand is an old box she found in the garage. The pitcher and paper cups were taken from the kitchen. Which of the following is true?
a. The opportunity cost of the lemonade is zero. b. The only opportunity cost of the lemonade is Amanda's time. c. Amanda's explicit costs are zero. d. The implicit costs of Amanda's lemonade are zero. e. Whatever revenue Amanda gets will be pure economic profit.
You are in the market for a used 2013 Honda Accord. You know that half of the 2013 Accords are lemons and half are peaches. If you could be assured that the Accord you were buying was a peach, you would be willing to pay up to $10,000. On the other hand, you would only be willing to pay $2,000 for a lemon. You have no ability to discern whether any particular Accord is a lemon or a peach. Sellers of Accords, on the other hand, are likely to know whether their particular car is a lemon or a peach. Suppose sellers of lemons will sell their cars for $1,500 or more and peach sellers will be willing to sell their cars for $8,500 or more. You are willing to offer ________ for a car of unknown quality and ________ are willing to sell you their car.
A. $2,000; lemon owners only B. $5,000; lemon owners only C. $6,000; lemon owners only D. $8,500; both lemon and peach owners