Which of the following statements is correct? A) In the short run, if a firm chooses...

Which of the following statements is correct?

A) In the short run, if a firm chooses to produce no output (i.e., shut down) its total costs of production will equal its total fixed costs.

B) A firm minimizes its total costs of production when average variable cost is minimized.

C) If a firm decides to shut down, its short-run total costs will equal 0.

D) As a firm increases output in the short run, the change in total costs is equal to the change in total variable costs.

Solutions

Expert Solution

In the short run, a firm will shut down when it is unable to cover it's variable costs, that is, only if it's price < Average variable cost, at the profit maximizing output level. However, as a firm increases output in the short run, the change in total costs is equal to the change in total variable costs(because fixed cost is a cost that remains constant. It doesn't change with change in output).

Answer: option D

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Which of the following is correct if there is a favorable supply shock? a. the short-run...

Which of the following is correct if there is a favorable supply shock? a. the short-run aggregate supply curve and the short-run Phillips curve both shift right. b. the short-run aggregate supply curve and the short-run Phillips curve both shift left. c. the short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left. d. the short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.

Which of the following statements is correct? If a firm is located in a country with...

Which of the following statements is correct? If a firm is located in a country with a relatively unstable political environment, management will require a lower rate of return on capital projects. Foreign bonds sold in the United States are called Samurai bonds. The spot rate is the exchange rate at which one currency can be converted to another immediately. All the answers are correct. With the international capital budgeting, the decision to accept international projects with a negative NPV...

Which of the following is correct? The short-run, but not the long aggregate supply curve is consistent...

Which of the following is correct? The short-run, but not the long aggregate supply curve is consistent with the idea that nominal variables do not affect real variables. The long-run, but not the short-run, aggregate supply curve is consistent with the that nominal variables do not affect variables. The long-run and short-run supply curves are consistent with the idea that nominal variables affect real variables. Neither the long-run nor the short-run aggregate supply curve is consistent with the idea that nominal variables affect real...

Which of the following statements is CORRECT? a. If a firm sold some inventory on credit...

Which of the following statements is CORRECT? a. If a firm sold some inventory on credit as opposed to cash, then there is no reason to think that either its current or quick ratio would change. b. If a firm has high current and quick ratios, then it must be managing its liquidity position well. c. If a firm sold some inventory on credit, then its current ratio would probably not change much, but its quick ratio would decline. d....

Which of the following statements is correct? a. A firm with monopoly power faces a downward...

Which of the following statements is correct? a. A firm with monopoly power faces a downward sloping demand curve. When all output units are sold at the same price, the demand curve also gives the firm’s average revenue per output sold. Its marginal revenue curve per output is found below the demand curve. b. A firm with monopsony power faces an upward sloping supply curve. When all input units are purchased/rented at the same price, the supply curve also gives...

In the short run, when the firm produces zero units of output, which of the following...

In the short run, when the firm produces zero units of output, which of the following is always equals to zero? a. total cost b. total variable cost c. economic profit d. total fixed cost e. economic loss

63) Which of the following would NOT usually be a short-run decision for the firm? Select...

63) Which of the following would NOT usually be a short-run decision for the firm? Select one: a. recalling workers who were previously laid off b. having labour work two hours overtime each day in order to expand output c. building another wing on the plant in order to add a new assembly line d. placing an order with a supplier for additional raw materials Which of the firms below would we expect might typically have the longest short run?...

Show working 5) Which of the following would NOT be a short-run decision for the firm?...

Show working 5) Which of the following would NOT be a short-run decision for the firm? A) Recall workers who were previously laid-off B) Have labor work two hours overtime each day in order to expand output C) Build another wing on the plant in order to add a new assembly line D) Place an order with a supplier for additional raw materials 6) A basic distinction between the long run and the short run is that A) if a...

Which of the following statements is (are) correct?

10. which of the following statements is (are) correct?(x) When the government runs a budget deficit, investment is lower than it would be otherwise because interest rates are higher than they would be otherwise.(y) A reduction in the budget deficit would cause a shortage of loanable funds at the original interest rate, and as a result, interest rates would rise.(z) When the government runs a budget deficit, national saving is higher than it would be otherwise.A. (x), (y) and (z)B....

Which of the following statements is NOT CORRECT?

‏____ Which of the following statements is NOT CORRECT? a. When a corporation's shares are owned by a few individuals and are not traded on public markets, we say that the firm is "closely, or privately, held." b. "Going public" establishes a firm's true intrinsic value, and it also insures that a highly liquid market will always exist for the firm's shares. c. When stock in a closely held corporation is offered to the public for the first time, the...

Subjects