Chapter 21: Problem 27

In the short run the perfect competitor will probably (LO5) a) make a profit or break even b) take a loss or break even c) make a profit or take a loss

Short Answer

Expert verified

In the short run, a perfect competitor will probably make a profit, incur a loss, or break even, depending on its cost structure and market conditions. Therefore, the best answer is choice (c).

Step by step solution

Define the short-run options for a perfect competitor.

In the short run, a perfect competitor will try to maximize its profit. However, depending on its cost structure and market conditions, it may either make a profit, incur a loss, or break even. - Making a profit: If the firm's revenue exceeds its costs, it will earn a profit. - Incurring a loss: If the firm's costs exceed its revenue, it will take a loss. - Breaking even: If the firm's revenue matches its costs, it will neither earn a profit nor incur a loss; it will break even.

Evaluate Choice (a)

Choice (a) suggests that a perfect competitor will probably make a profit or break even in the short run. While it is possible for a perfect competitor to make a profit or break even, that isn't the whole picture as there's a possibility of incurring a loss too. Therefore, merely focusing on profit or breaking even in the short run would not be a complete answer.

Evaluate Choice (b)

Choice (b) suggests that a perfect competitor will probably take a loss or break even in the short run. Similar to choice (a), this statement considers only two of the three possible outcomes for a perfect competitor: taking a loss or breaking even. The possibility of making a profit is not considered in this option. Hence, choice (b) does not provide a complete answer either.

Evaluate Choice (c)

Choice (c) suggests that a perfect competitor will probably make a profit or take a loss in the short run. This option seems to be the most comprehensive because it covers all three possible outcomes for a perfect competitor in the short run: making a profit, incurring a loss, or breaking even.

Conclusion

The most accurate answer to the given problem is choice (c), as it considers all possible outcomes for a perfect competitor in the short run: making a profit, incurring a loss, or breaking even.