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

Question

Which of the following would entice a firm to enter an industry?

Choose 1 answer:
(A) $P=A V C$
(B) $P<A T C$
(C) $P>A V C$
(D) $P>A T C$
(E) $P=A T C$

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Entry Condition: A firm will enter an industry if it expects to make a profit. This occurs when the price (P) is greater than the average total cost (ATC). ‖ ‖ b ⋮ Comparison of Options: - Option (A) $P = AVC$: This means the firm is covering its variable costs but not necessarily making a profit. - Option (B) $P < ATC$: This means the firm is not covering its total costs and would incur a loss. - Option (C) $P > AVC$: This means the firm is covering its variable costs but not necessarily making a profit. - Option (D) $P > ATC$: This means the firm is covering all its costs and making a profit. - Option (E) $P = ATC$: This means the firm is breaking even, covering all its costs but not making a profit. ‖ ‖ c ⋮ Conclusion: The correct condition for a firm to be enticed to enter an industry is when $P > ATC$, as this ensures the firm is making a profit. ‖ ∻Answer∻ ⚹ (D) $P > ATC$ ⚹ ∻Key Concept∻ ⚹ Entry Condition ⚹ ∻Explanation∻ ⚹ A firm will enter an industry if it expects to make a profit, which occurs when the price is greater than the average total cost. ⚹◊What impact does the relationship between price and average variable cost have on a firm's decision to enter an industry according to Microeconomics⍭ Generate me a similar question◊

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