Consider the following cost curves for Firm X,a perfectly competitive firm. FIGURE 9-5
-Refer to Figure 9-5.At output Q₂ and price P₂,which of the following is FALSE?

Question

Consider the following cost curves for Firm X,a perfectly competitive firm. FIGURE 9-5 -Refer to Figure 9-5.At output Q₂ and price P₂,which of the following is FALSE?

Quizplus · Accepted Answer

At output Q₂ and price P₂, the firm is making economic profits. This means that there are incentives for new entrants to enter the market and for existing firms to increase their production. Therefore, it is false to say that there are no economic profits to attract new entrants (Option A). The correct statement is that there are economic profits to attract new entrants. The other statements are true. The firm is producing at the minimum efficient scale (Option E), and it has no unexploited internal economies of scale (Option D). Also, the firm is producing at the point where price equals marginal cost, short-run average total cost, and long-run average total cost (Option C), which is the long-run profit-maximizing position (Option B).

Consider the Following Cost Curves for Firm X,a Perfectly Competitive