Review of microeconomic theory of firm costs and firm behavior: a) In the long-run, all input...

Review of microeconomic theory of firm costs and firm behavior:

a) In the long-run, all input costs are [choose] ["minimized", "maximized", "fixed", "variable"] .

b) In the long-run, a firm's profit is equal to total revenue minus total cost. So to maximize profits a firm will want to maximized the difference between [choose] ["quantity", "price", "marginal cost", "average variable costs"] and average total cost.

c) If a firm’s goal is to maximize profits in a market where they are price takers (that is, they cannot influence market price), in the long-run they will produce the quantity that [choose] ["maximizes", "minimizes", "compensates for", "is equal to"] their average total cost.

d) In the long-run, and with decreasing returns to scale, firms will need to [choose] ["lower prices", "advertise", "raise prices", "shift their supply curve"] in order to increase production to higher quantities.

Expert Solution

a) In the long run all input costs in the market are "variables".

b) price and the average total cost, the higher the difference between the two the more revenue they will be making and hence the profit will increase.

c) IN the long run they will be producing at the point where the price and the average total cost are equal.

d) they will have to raise the price to increase the production to a higher quantity.

Rahul Sunny answered 2 years ago

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