A perfectly competitive firm will operate and incur an economic loss in the short run if O shareholders do not know about the loss. O the loss is smaller than its total fixed costs. O it knows it can recoup the loss in the long run. O the loss can offset future profits.

A perfectly competitive firm will operate and incur an economic loss in the short run if O shareholders do not know about the loss. O the loss is smaller than its total fixed costs. O it knows it can recoup the loss in the long run. O the loss can offset future profits.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 33CTQ: Since a perfectly competitive firm can sell as much as it wishes at the market price, why can the...

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Question

A perfectly competitive firm will operate and incur an economic loss in the short run if
O shareholders do not know about the loss.
O the loss is smaller than its total fixed costs.
O it knows it can recoup the loss in the long run.
O the loss can offset future profits.

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Step 1: Understand the Concept of Operating Decisions in Perfect Competition

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Step 2: Assess Operating When Loss is Smaller Than Total Fixed Costs

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Step 3: Evaluate Continuing Operations for Future Recoupment

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Step 4: Analyze Tax Implications of Operating at a Loss

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