-The Above Figure Shows Three Possible Average Total Cost Curves

-The above figure shows three possible average total cost curves. If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC₀, each produces 20 units, and the market price of the good is $16 per unit, then

A) the firms make an economic profit of $8 per unit.
B) firms will enter the industry and the number of firms increases.
C) the firms' ATC curves will eventually shift to become the same as ATC₁.
D) firms will exit the industry and the number of firms decreases.
E) Both answer A and answer B are correct.

Correct Answer:

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