Question

13. If a firm shuts down in the short run and produces no output, its total cost will be

a. zero

b. equal to total variable cost

c. equal to explicit costs only

d. equal to total fixed costs

e. equal to implicit costs only

14. The shape of the long-run average cost curve reflects

a. the maximization of total product

b. increasing and diminishing marginal returns

c. economies and diseconomies of scale

d. all of the above

e. falling average fixed costs

15. A firm's long-run average cost curve is also called

a. its planning curve

b. its average fixed-cost curve

c. its production curve

d. Bob

16. In the long-run, a firm will choose a plant size that has the

a. maximum level of resource use per unit of total output

b. minimum average total cost of producing a target level of output

c. minimum of average variable costs

d. capacity to produce the largest amount of output possible

17. The price charged by a perfectly competitive firm is determined by

a. the cartel that is established amongst the firms in the industry

b. market supply and demand

c. the firm's average variable costs

d. each individual firm

e. the government

18. The demand curve for the perfectly competitive firm is

a. upward sloping

b. perfectly inelastic

c. perfectly elastic

d. the same as its market demand curve

e. the portion of its marginal cost curve that lies above average variable costs

19. A perfectly competitive (PC) firm will not set its price below market price because

a. demand will exceed supply

b. demand is perfectly inelastic .

c. the firm can sell any amount it chooses at the prevailing market price

d. the statement is incorrect—the firm will sell more if it sets price below market price

20. A perfectly competitive firm’s (short-run) supply curve is its

a. marginal cost curve above its minimum average total cost (ATC)

b. marginal cost curve—the whole thing

c. marginal cost curve above its minimum average variable cost (AVC)

d. demand curve

Answer 1

13. Option d. If a firm would shuts down it needs to cover its fixed expenses

14. Option d. As average cost decreases in the beginning reaches a minimum and then increases

15. Option a. As a firm plans to produce based on the long run cost

16. Option b. As it would help to maximize profits

17. Option c.

18. Option c. As it produces quantities for a same price

19. Option c

20. Option c