Question

In: Economics

1. A firm should ________ in the short run and ________ in the long run if...

1.

A firm should ________ in the short run and ________ in the long run if it cannot cover its variable costs.

shut down; leave the industry

shut down; decrease output

decrease output; leave the industry

decrease output; decrease output

2.

Differentiated products may be sold in which of the following?

Monopolistic competition and oligopoly

Perfect competition and monopolistic competition

Monopoly and oligopoly

Oligopoly and perfect competition

Solutions

Expert Solution

1. Correct Option: decrease output; leave the industry

Explanation: In the short run, if the firm cannot cover its variable cost, then the firm should wait in the market and decrease output. But in the long run, if the firm cannot cover its variable cost, then the firm should leave the market as it will be difficult for firm to survive.

2. Correct Option: Monopolistic competition and oligopoly

Explanation: In monopolistic and oligopoly market products can be differentiated as more substitute goods are available and consumer is ready to buy differentiated goods.

Rahul Sunny answered 2 years ago
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