Question 1 The shut down point is when: A firm can no longer pay its debts. A fi
ID: 1126345 • Letter: Q
Question
Question 1
The shut down point is when:
A firm can no longer pay its debts.
A firm can only earn normal profits.
Price is below minimum average total costs.
Price is equal to minimum average variable costs.
Output falls below minimum marginal costs.
Question 6
If price is below minimum average total costs but is above minimum average variable costs, then:
Firms will begin to shut down immediately.
Firms will earn excess profits in the short run and in the long run there will be entry into the industry.
Economic profits will be less than zero but firms will not exit because they are still earning their normal profits.
Economic profits will be zero but firms will remain in the industry because they earn normal profits.
Economic profits are less than zero but firms are paying some of their fixed costs so they will continue to produce in the short term and exit in the long term when their fixed obligations have expired.
Question 7
If price is above minimum average total costs, then:
Firms will begin to shut down immediately.
Firms will earn excess profits in the short run and in the long run there will be entry into the industry.
Economic profits will be less than zero but firms will not exit because they are still earning their normal profits.
Economic profits will be zero but firms will remain in the industry because they earn normal profits.
Economic profits are less than zero but firms are paying some of their fixed costs so they will continue to produce in the short term and exit in the long term when their fixed obligations have expired.
Question 8
If price is equal to minimum average total costs, then:
Firms will begin to shut down immediately.
Firms will earn excess profits in the short run and in the long run there will be entry into the industry.
Economic profits will be less than zero but firms will not exit because they earn normal profits.
Economic profits will be zero but firms will remain in the industry because they earn normal profits.
Economic profits are less than zero but firms are paying some of their fixed costs so they will continue to produce in the short term and exit in the long term when their fixed obligations have expired.
1 points
Question 9
If price is equal to minimum average variable costs, then:
Firms will begin to shut down immediately.
Firms will earn excess profits in the short run and in the long run there will be entry into the industry.
Economic profits will be less than zero but firms will not exit because they earn normal profits.
Economic profits will be zero but firms will remain in the industry because they earn normal profits.
Economic profits are less than zero but firms are paying some of their fixed costs so they will continue to produce in the short term and exit in the long term when their fixed obligations have expired.
Question 10
Which of the following is NOT an assumption of a perfectly competitive market?
Each seller produces an identical product.
There is easy entry into and exit from the industry.
Firms set their prices equal to their marginal cost.
There is perfect information.
There are many buyers and sellers.
A.A firm can no longer pay its debts.
B.A firm can only earn normal profits.
C.Price is below minimum average total costs.
D.Price is equal to minimum average variable costs.
E.Output falls below minimum marginal costs.
Explanation / Answer
1> D> Price is equal to minimum average variable costs.
Any price below the AVC will force the firm to shut down in the short return.
6> Economic profits are less than zero but firms are paying some of their fixed costs so they will continue to produce in the short term and exit in the long term when their fixed obligations have expired.
Reason
If the price is lesser than the avc, it must shut down immediately but not otherwise.
7> Firms will earn excess profits in the short run and in the long run there will be entry into the industry.
Reason
If price is higher than the average cost, it must earn a positive profit.
8> Economic profits will be zero but firms will remain in the industry because they earn normal profits.
Reason
It is normal profit as the profit is zero.
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