Question

Consider a market with many firms that have different cost structures.

Unless shutdown or exit is​ optimal, every firm expands production until​ ___________.

A.

marginal product is maximized.

B.

marginal​ revenue, marginal​ cost, and price are all equal

​(MR

​ = MC​ =

P​).

C.

marginal revenue is equal to the minimum of​ short-run average total cost.

D.

marginal cost is minimized.

To construct the supply curve in a market with many firms with different cost​ structures, the​ ___________.

A.

individual supply curves for each firm are added together.

B.

individual average variable cost curves are added together.

C.

minimums of the​ firms' marginal cost curves are linked together.

D.

minimums of the​ firms' long-run average total cost curves are linked together.

The equilibrium price is the​ ___________.

A.

​long-run average total cost of the last entrant into the market.

B.

average marginal cost of the firms.

C.

​long-run average total cost of the first entrant into the market.

D.

minimum of the average variable cost of the smallest firm in the market.

In terms of economic​ profits, early market entrants earn

(negative

zero

positive)

economic profits and the last entrant earns

(negative

zero

positive)

economic profits.

A perfectly competitive firm will choose to shut down when the (price (marginal revenue)/ average total cost) intersects the marginal cost curve below the ( total cost curve average variable cost curve ).

​Therefore, the​ short-run supply curve for a perfectly competitive firm is represented by​ __________.

A. the portion of the average variable cost curve below marginal cost. B. the portion of the average variable cost curve above marginal cost. C. the portion of the marginal cost curve above average total cost. D. the portion of the marginal cost curve above average variable cost.

In the long​ run, the supply curve for a perfectly competitive firm is represented by​ __________.

A. the portion of the marginal cost curve above average total cost. B. the portion of the marginal cost curve above average variable cost. C. the portion of the average variable cost curve below marginal cost. D. the portion of the average variable cost curve above marginal cost.

Answer 1

Consider a market with many firms that have different cost structures.

Unless shutdown or exit is​ optimal, every firm expands production until​ ___________.

B. marginal​ revenue, marginal​ cost, and price are all equal ​(MR​ = MC​ = P​).

Explanation: For profit maximisation, MR​ = MC​ = P​

To construct the supply curve in a market with many firms with different cost​ structures, the​ ___________.

A.individual supply curves for each firm are added together.

Explanation: We horizontally sum the supply curves of the firms.

The equilibrium price is the​ ___________.

A.​long-run average total cost of the last entrant into the market.

In terms of economic​ profits, early market entrants earn positive economic profits and the last entrant earns zero economic profits.

Explanation: Early entrants are more efficient and have lower costs.