(1) The short-run break-even price is the point at which: A) average variable co

Question

(1) The short-run break-even price is the point at which:

A) average variable cost is at a minimum. B) marginal cost, average total cost and marginal revenue are all equal. C) marginal cost, price and average variable cost are all equal. D) price is less than marginal cost.

(2) If the long-run supply curve slopes downward, we know that this is:

A) a decreasing-cost industry. B) an increasing-cost industry. C) a situation in which no input prices change as firms enter and exit the industry. D) a constant-cost industry.

(3)For a perfectly competitive firm, which of the following is NOT true?:

A) The average revenue curve, the demand and the marginal revenue curves are identical. B) The slope of the total revenue curve is equal to the product price. C) The total revenue curve is horizontal. D) The total revenue curve begins at the origin and slopes upward as output increases.

(4) In the above figure, if this firm produces output level Q2, it has average total costs of:

A) OE. B) OF. C) OD. D) OC.

Explanation / Answer

a) "B"

In the short run, the break-even point will occur at a point where the marginal cost, average total cost, and the marginal revenue are equal. At this point, the revenue will be equal to the total cost in the firm and it will be breaking even.

b) "A"

in a decreasing cost industry, the cost curve of the firm will be sloping downward.

c) "D"

The slope doesn't move upward as the production increases. it just remains as much the price is. NAd, in the long run, it may be upward or downward sloping.

d) "C"

The firm is producing at an average total cost of OD.

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