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In: Economics

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 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.

QUESTION 16

The marginal revenue for a price taker is

		equal to price.
		less than price.
		more tha price.
		unrelated to price.

Expert Solution

13) in the short run a perfectly competitive firm will stay in business as long as price exceeds average variable cost. If if the price falls below the average variable cost the firm will immediately shutdown and exit.

Hence third option is correct.

14) For a price taker price is equal to marginal revenue.

If the market price is expected to rise at least to ATC then a price taker firm in the short run would continue to produce a quantity such that marginal revenue that is price equals marginal cost because the market price is already above the minimum average variable cost.

Hence, second option is correct.

15) the short run shutdown point for a perfectly competitive firm is the lowest point of AVC curve.

Hence, first option is correct.

16) the marginal revenue of a price taker is equal to price.

Hence, first option is correct

Rahul Sunny answered 2 years ago

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