Question

Walmart is able to order huge quantities of shovels and rakes at very low prices from many different factories in China as it opens more stores. This best represents:

	A.	long-run diseconomies of scale.
	B.	short-run economies of scale.
	C.	economies of scope.
	D.	long-run economies of scale.

If the market price is $60, a firm's minimum average total cost is $70, and minimum average variable cost is $50, what should the firm do in this perfectly competitive market?

	A.	The firm should continue producing in the short run in order to minimize losses.
	B.	The firm should shut down operations in order to minimize losses.
	C.	The firm should continue producing because the firm is earning a normal profit.
	D.	The firm should continue producing because the firm is earning an economic profit.

If the price of copper pipes is $70 in a perfectly competitive market, and a firm is producing a quantity at which the marginal cost is $65, is this firm maximizing profit?

	A.	No, this firm should be producing more to maximize profit.
	B.	Yes, this firm is maximizing profit.
	C.	No, this firm should be producing less to maximize profit.
	D.	A determination cannot be made without knowing the marginal revenue.

In a perfectly competitive industry, short-run economic profits will lead firms to _____ the market, causing market price to _____.

	A.	enter; decrease
	B.	enter; increase
	C.	exit; decrease
	D.	exit; increase

Answer 1

1) long-run economies of scale.

option(D)

2) The firm should continue producing in the short run in order to minimize losses.

option(A)

3) No, this firm should be producing more to maximize profit

option(A)

4) enter; decrease

option(A)