-Assume that the firm described in Table 6.1 is earning a normal profit at the profit-maximizing output level. The firm will
A) go out of business immediately.
B) increase the price of its product.
C) produce at the profit-maximizing output level in both the short run and the long run.
D) produce at the profit-maximizing output level in the short run and shut down in the long run.
E) produce at the profit-maximizing output level in the short run and go out of business in the long run.

Question

-Assume that the firm described in Table 6.1 is earning a normal profit at the profit-maximizing output level. The firm will
A) go out of business immediately. 
B) increase the price of its product. 
C) produce at the profit-maximizing output level in both the short run and the long run. 
D) produce at the profit-maximizing output level in the short run and shut down in the long run. 
E) produce at the profit-maximizing output level in the short run and go out of business in the long run.

Quizplus · Accepted Answer

Earning a normal profit at the profit-maximizing output level means the firm is covering all its costs, including opportunity costs. Therefore, it has no economic incentive to shut down in the short run or the long run, and will continue to produce at this level as long as conditions remain the same.

-Assume That the Firm Described in Table 6