Type your question here 1) If there are many firms in an industry and each firm\
ID: 1100408 • Letter: T
Question
Type your question here
1) If there are many firms in an industry and each firm's product is indistinguishable from the products of all other firms, the individual firm's demand curve will be
a) Upward sloping and different for each firm
b) Downward sloping and, different for each firm
c) Downward sloping and identical for every firm
d) Horizontal and different for each firm
e) Horizontal and identical for every firm
2) Assume that a profit-maximizing, perfectly competitive firm has economic losses in the short run. If the firm continues to produce and sell its goods, then which of the following must be true?
a) The firm is covering all of its fixed and variable costs of production.
b) The firm is covering all of its fixed costs but not all of its variable costs of production.
c) The firm should shut down because it is covering all of its variable costs of production.
d) The firm is covering all of its variable costs of production but not all of its fixed costs.
e) The firm must have raised the price of its goods in order to minimize its losses.
3) Questions 3 and 4 refer to the graph below, which shows the cost and revenue curves of a profit-maximizing firm in a competitive industry. MC is the marginal cost, ATC is short-run average total cost, LRAC is long-run average total cost, P is price and MR is marginal revenue.
Explanation / Answer
1. e) Horizontal and identical for every firm
2. d) The firm is covering all of its variable costs of production but not all of its fixed costs.
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