Like the short run: A) firms operate only if they make a positive profit. B) the

Question

Like the short run: A) firms operate only if they make a positive profit. B) the maximum number of firms in the market is fixed C) the long run supply curve is the sum of the individual firms' supply curves D) All of the above In the short run: A) firms will shut down if operating at a loss. B) firms may choose to operate at a loss. C) most firms have short run supply curves that are the same as their long run supply curves D) profit maximizing firms have identical short run supply curves If market price is greater than or equal to the minimum of AVC but below the minimum of AC, then A) the firm will shut down B) profit is positive and so the firm will operate. C) revenue is lower than variable costs. D) the firm will operate because its loss is less than if it shut down.

Explanation / Answer

For the first part awnser is D, In the short run, a firm produces an output at which marginal cost =Price. If the price is higher than the marginal cost, it will pay the firm to expand its output so as to equal its price. On the other hand, if price is less than the MC, it is incurring a loss, and it will reduce its output till the marginal cost and the price are made equal. Maximum number of firms is fixed, as all firm add up to make entire market.

For the second part, awnser is B in the short-run, a firm will not supply at a price below its minimum average variable cost. That is, in the short-run, a firm must try to cover its’ Variable cost at least (other is the fixed cost). Hence, the short-run supply curve of a firm coincides with that portion of the short-run marginal cost curve which lies above the minimum point of the short-run average variable cost (SAVC) curve.

For the third part, awnser is D and the explaination is above.

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.