Question:

Suppose a firm sells its product at a price lower than the opportunity cost of the inputs used to produce it. Which is true?

A.

The firm will earn accounting and economic profits.

B.

The firm will face accounting and economic losses.

C.

The firm will face an accounting loss, but earn economic profits.

D.

The firm may earn accounting profits, but will face economic losses.

Answer» d. The firm may earn accounting profits, but will face economic losses.