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Jose's Restaurant Operates in a Perfectly Competitive Market

Question 401

Multiple Choice

Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation,


A) Jose's restaurant is earning a positive economic profit.
B) Jose's restaurant should shut down immediately.
C) Jose's restaurant is losing money in the short run but should continue to operate.
D) the market price will rise in the short run to increase profits.

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