Overexpansion can cause a perfectly competitive firm to ______.

Question

Quizplus · Accepted Answer

Overexpansion refers to a situation where a firm expands its production beyond the point where its average total cost is minimized. If a perfectly competitive firm overexpands, it will produce at a quantity where the average total cost exceeds the market price, resulting in economic losses. Therefore, choice C is the correct answer. Choices A and D are incorrect because they describe situations where the firm is making a profit, which is not the case when a firm overexpands. Choice B is incorrect because it implies that the firm is making a profit, which is not the case when a perfectly competitive firm is in long-run equilibrium.

Overexpansion Can Cause a Perfectly Competitive Firm to ______