Which of the following would entice a firm to enter an industry? Choose 1 answer: (A) $PA V C$ (B) $P=A V C$ (C) $PA T C$

Question

Which of the following would entice a firm to enter an industry?
Choose 1 answer:
(A) $P>A V C$
(B) $P=A V C$
(C) $P<A T C$
(D) $P=A T C$
(E) $P>A T C$

Accepted Answer

∻Solution∻ ‖ a ⋮ Understanding Entry Conditions: Firms consider entering an industry when they can expect to earn a profit. ‖ ‖ b ⋮ Price and Average Variable Cost (AVC): If the price ($P$) a firm can charge for its product is greater than its average variable cost ($AVC$), the firm can cover its variable costs and contribute to fixed costs in the short run. ‖ ‖ c ⋮ Price and Average Total Cost (ATC): For long-term profitability and to entice a firm to enter an industry, the price ($P$) must be greater than the average total cost ($ATC$), which includes both fixed and variable costs. ‖ ∻Answer∻ ⚹ (E) $P > ATC$ ⚹ ∻Key Concept∻ ⚹ Long-Term Profitability ⚹ ∻Explanation∻ ⚹ A firm will be enticed to enter an industry if it expects to earn a profit in the long run, which occurs when the price is greater than the average total cost◊What factors in macroeconomics can influence a firm's decision to enter an industry based on price and cost considerations?⍭ Generate me a similar question◊⚹

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