by ) Al of the above 2) In the short run, a firm should continue to produce at a
ID: 1120435 • Letter: B
Question
by ) Al of the above 2) In the short run, a firm should continue to produce at a loss i a) Price is greater than average b) Price is greater than average total cos c) Price is greater than average variable costs fixed costs d) They should never continue to produce if they are making a loss 3) If a firm's investment decisions 30% chance, $120 million with a 50% chance s have uncertain impacts on profits, where profits are $90 m , and $150 million with a 20% chance. The expec of the investment are: a) $117 million b) $100 million c) $90 million d) $120 million difference between accounting profits and eco Economic profits include conomic profits include the opportunity costs of a firm nomic profits are in t nomic profits is that: fixed costs whereas accounting profits don't he long run whereas accounting profits are in the shor de variable costs whereas accounting profits dontExplanation / Answer
Ans)
2)
c)Price is greater than the average variable cost
The minimum of the AVC is the shut down point.If the price is above this but less than the ATC the firm will produce because the firm can atleast cover a part of its fixed costs.
3)
a) $117 million
E(x)=Sum(Probability*Profit)
E(x)=(90*30%)+(120*50%)+(150*20%)
E(x)=117
4)
b) Economic profits include the opportunity costs of a firm's resources but accounting profits dont
Economic profits includes the explicit as well as implicit costs the accoinuting profits on the other hand do not have implicit costs.
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