In short-run equilibrium, a perfectly competitive firm

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm may earn a profit or a loss depending on the market price and the firm's cost structure. If the market price is sufficiently high, the firm may earn a profit, but if the market price is lower than the average variable cost, the firm may shut down in the short run and incur a loss. Therefore, option A is the correct answer. Options B and C are incorrect because a perfectly competitive firm cannot always earn a profit or always incur a loss. Option D is incorrect because a firm's fixed cost does not determine its ability to earn a profit in the short run.

In Short-Run Equilibrium, a Perfectly Competitive Firm