Question

In: Economics

QUESTION 11 In the short-run, if a perfectly competitive firm is producing at a price below...

QUESTION 11

In the short-run, if a perfectly competitive firm is producing at a price below average total cost, its economic profit is

		positive.
		zero.
		negative.
		positive, zero, or negative.

QUESTION 12

Assume that a firm's marginal revenue barely exceeds marginal cost. To maximize profit, teh firm should:

		expand output.
		contract output.
		maintain output.
		there is insufficient information to answer the question.

QUESTION 13

In the short run, a perfectly competitive firm will stay in business as long as:

		Price equals average revenue.
		marginal revenue is greater than marginal cost.
		price exceeds average variable cost.
		price is less than average variable cost.

QUESTION 14

Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC), and the market price is expected to rise at least to ATC in the near future. In the short run, a firm that is a price taker would:

		immediately shut down and get out of the industry.
		continue to produce a quantity such that marginal revenue equals marginal cost.
		shut down temporarily, in hopes of restarting in the near future.
		cut price and expand output in hopes of achieving economies of scale

QUESTION 15

Where is the "short-run shut down point" for a perfectly competitive firm?

		The lowest point of AVC curve.
		The lowest point of ATC curve.
		The lowest point of MC curve.
		It depends. Could be the lowest point of AVC, ATC, or MC curve.

Expert Solution

1. Negative as if a perfectly competitive firm is producing at a price below average total cost it means the firm is not able to cover its total cost and it lead the firm towards negative profits. Option C is correct.

2. Expand output as it means the firm has not been utilizing to its fullest level. Therefore, by increasing the output the marginal revnue will increase and it will exceeds marginal coast and maximize profit. Option A is correct.

3. A perfectly competitive firm will stay in business as long as price exceeds average variable cost. It means the firm can operate till this level with a loss but below this point the firm gets shutdown. Option C is correct.

4. The firm will continue to produce a quantity such that marginal revenue equals marginal cost. Option B is correct.

5. The lowest point of AVC curve as from this point a firm cannot continue their business. Option A is correct.

Rahul Sunny answered 2 years ago

The perfectly competitive firm should produce in the a. short run if price is below average...

The perfectly competitive firm should produce in the a. short run if price is below average variable cost. b. long run if price is below average variable cost. c. short run if price is below average total cost but above average variable cost. d. long run if price is below average total cost but above average variable cost. d. long run if price is below average total cost but above average variable cost.

Suppose a perfectly competitive firm in the short-run is currently producing an output level of 50,000...

Suppose a perfectly competitive firm in the short-run is currently producing an output level of 50,000 units, charging a price per unit of $4. The firm incurs variable costs of $280,000 in producing this level of output. It also has fixed costs of $60,000. a) Calculate the economic profit (or loss) from the firm producing and selling these 50,000 units of output. Show all your work. (2 points) b) Calculate the economic profit (or loss) from the firm shutting down...

1. Suppose a perfectly competitive firm in the short-run is currently producing an output level of...

1. Suppose a perfectly competitive firm in the short-run is currently producing an output level of 50,000 units, charging a price per unit of $4. The firm incurs variable costs of $280,000 in producing this level of output. It also has fixed costs of $60,000. a) Calculate the economic profit (or loss) from the firm producing and selling these 50,000 units of output. b) Calculate the economic profit (or loss) from the firm shutting down and producing zero units. c) Given the correct...

A perfectly competitive firm is making losses in the short-run. Will the market price rise or...

A perfectly competitive firm is making losses in the short-run. Will the market price rise or fall in the long-run? Explain your answer.

Explain why a perfectly competitive firm will shut down in the short run if price is...

Explain why a perfectly competitive firm will shut down in the short run if price is lower than average variable cost but will continue to produce if price is below average total cost but above average variable cost. In long-run competitive equilibrium, P = MC = SRATC = LRATC. Because P = MR, we can write the preceding condition as P = MR = MC = SRATC = LRATC. The condition thus consists of four parts: (a) P = MR,...

A firm in a perfectly competitive market will produce no output in the short run if the price is below $20 but will produce if the price is above $20.

A firm in a perfectly competitive market will produce no output in the short run if the price is below $20 but will produce if the price is above $20. The smallest quantity they will produce in the short run is 6. Firms will earn 0 economic profit if the price is $447.5 and its profit maximizing quantity is 21 at that price. The firm’s fixed cost is $6615. Assume the good can be produced in continuous quantities.Draw a picture...

QUESTION 13 In the short run, a perfectly competitive firm will stay in business as long...

QUESTION 13 In the short run, a perfectly competitive firm will stay in business as long as: Price equals average revenue. marginal revenue is greater than marginal cost. price exceeds average variable cost. price is less than average variable cost. QUESTION 14 Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC), and the market price is expected to rise at least to ATC in the near future. In the short...

The short-run supply curve for a firm in a perfectly competitive industry is: The short-run marginal...

The short-run supply curve for a firm in a perfectly competitive industry is: The short-run marginal cost curve that is above minimum average variable cost (which takes into account the fact that the firm should shut down if price falls below average variable cost). The entire average variable cost. The entire short-run marginal cost curve. The entire average total cost curve. Which of the following statements is true regarding short-run and long-run costs? (Assume all cost curves have typical shapes,...

Question 19 In a perfectly competitive market, a firm may have losses in the short run....

Question 19 In a perfectly competitive market, a firm may have losses in the short run. Suppose the firm’s total costs are $1,000 and fixed costs are $200 when outputs are 100. The market-determined price of the good is $9 per unit. Which of the following statement is true? a. The price is less than the average variable cost b. The firm should shut down business c. The firm should continue doing business d. The price is less than average...

1. a. Consider a perfectly competitive firm in the short run. On a diagram, draw the...

1. a. Consider a perfectly competitive firm in the short run. On a diagram, draw the firm's average cost, average variable cost, and marginal cost curves. Briefly discuss the relationship among these curves. b. On your diagram, show how the profit maximizing level of output is determined for this firm, given a market price. Show the firm making a positive profit. c. On your diagram, show total revenue, total cost and profits associated with the production level from part b....