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A competitive price-searcher firm is currently producing 10 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information we can conclude that
A) the firm is currently earning zero profit.
B) the profits of the firm are negative.
C) firms are likely to enter this market in the long run.
D) the firm would earn more profit by reducing output.
Average Total Cost
The total cost of production divided by the total quantity produced, representing the cost per unit of output.
Marginal Revenue
The supplementary income generated by the sale of an extra unit of a product or service.
Market Entry
The process by which a company enters a new market, confronting challenges such as competition, legal requirements, and customer acquisition.
- Gain insight into the long-term equilibrium states within competitive markets and the contribution of economic profits.
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Learning Objectives
- Gain insight into the long-term equilibrium states within competitive markets and the contribution of economic profits.
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