{"id":45111,"date":"2024-04-15T21:53:23","date_gmt":"2024-04-15T21:53:23","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=45111"},"modified":"2024-04-15T21:53:23","modified_gmt":"2024-04-15T21:53:23","slug":"in-case-of-short-run-equilibrium-a-perfectly-competitive-firm-while-earning-abnormal-profits-operates-at-an-output-level-where","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/in-case-of-short-run-equilibrium-a-perfectly-competitive-firm-while-earning-abnormal-profits-operates-at-an-output-level-where\/","title":{"rendered":"In case of short-run equilibrium, a perfectly competitive firm while earning abnormal profits operates at an output level where:"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a978140e8009\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"true\">\r\n                    Marginal cost is the minimum                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    Average cost is the minimum                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"false\">\r\n                    Both marginal cost and average cost are equal                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    Marginal cost is higher than average cost                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is: A. Marginal cost is the minimum.<\/p>\n<p>In a perfectly competitive market, firms are price-takers, meaning they cannot influence the market price of their product. As a result, firms will maximize profits by producing at the output level where marginal revenue equals marginal cost. In the short run, this will be at an output level where marginal cost is below average cost, as the firm will be able to cover its variable costs and some of its fixed costs. However, in the long run, firms will enter the market until profits are driven to zero, at which point marginal cost will equal average cost.<\/p>\n<p>Here is a more detailed explanation of each option:<\/p>\n<ul>\n<li>Option A: Marginal cost is the minimum. This is the correct answer, as it is the only option that is consistent with the firm maximizing profits in the short run.<\/li>\n<li>Option B: Average cost is the minimum. This is not the correct answer, as the firm will not be maximizing profits if it is producing at an output level where average cost is the minimum. In the short run, the firm will maximize profits by producing at an output level where marginal revenue equals marginal cost, which will be at an output <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div> level where marginal cost is below average cost.<\/li>\n<li>Option C: Both marginal cost and average cost are equal. This is not the correct answer, as the firm will not be maximizing profits if it is producing at an output level where marginal cost and average cost are equal. In the short run, the firm will maximize profits by producing at an output level where marginal revenue equals marginal cost, which will be at an output level where marginal cost is below average cost.<\/li>\n<li>Option D: Marginal cost is higher than average cost. This is not the correct answer, as the firm will <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> not be maximizing profits if it is producing at an output level where marginal cost is higher than average cost. In the short run, the firm will maximize profits by producing at an output level where marginal revenue equals marginal cost, which will be at an output level where marginal cost is below average cost.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>In case of short-run equilibrium, a perfectly competitive firm while earning abnormal profits operates at an output level where:<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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