9. A perfectly competitive firm will produce in the short run aslong as A)the fi

Question

9. A perfectly competitive firm will produce in the short run aslong as

A)the firm receives a price greater than average total cost

B)the cost of producing is less than the cost of notproducing

C)the firm receives a price greater than average fixed cost

D)All options are incorrect

3. If total cost is $36 and variable costs are $16 at 4 units of output, average fixed cost is
A)$5
B)$4
C)$12
D)$2

Long-run equilibrium occurs where

A)all options

B)Price = marginal cost

C)Price = Minimum average total cost

D) Economic profit = 0

0. A unilaterally mandated protectionist policy that limits thequantity of certain imports is a
A)voluntary export restraint
B)tariff
C)quota
D)external economy

The demand curve for a perfectly competitive firm is

A) lower than marginal revenue

B) identical to the average revenue curve

C) upward sloping

D) downward sloping

9. A perfectly competitive firm will produce in the short run aslong as
A)the firm receives a price greater than average total cost
B)the cost of producing is less than the cost of not producing
C)the firm receives a price greater than average fixed cost
D)All options are incorrect

13. Diminishing returns occurs in the
A)short run because capital is variable
B)long run because capital is variable
C)short run because capital is fixed
D)long run because capital is fixed

1. Which of the following is true about profit maximization for aperfectly competitive firm?
A)Firms continue to increase prices to gain higher profits
B)A firm maximizes profit differently in the short run and the longrun
C)Firms can lower prices to gain higher profits
D)Profit is higher at that level of output than any other

5. An exporting country will
A)produce when the domestic price is lower than the world price
B)produce at a lower opportunity cost than an importing country
C)all options are correct
D)give up the least amount of resources to produce this good

15. Shutdown occurs under which of the following conditions?
A)Price = $10, ATC = $12, and AFC = $1
B)Price = $8, ATC = $10, and AFC = $2
C)Price = $10, ATC = $10, and ACF = $1
D)Price = $10, ATC = $12 and AFC = $2

Which statement best describes a gain from trade for an importing country

A) Domestic consumers can consume more goods

B) Domestic producers receive higher proces

C) Domestic producers can produce more goods

D) Domestic consumers pay higher prices

Explanation / Answer

A perfectly competitive firm will produce as long as Price>Average variable cost; in other terms if the cost of producing > cost of not producing then the firm should operate in the short run. Option b TC 36 VC 16 Fixed cost = TC- VC 20 Quantity 4 Average fixed cost = Fixed cost/ quantity 5 Option a Long run equlibrium occurs where Price= MC (as additional cost for producing should be equal to price); Price=minimum average total cost and economic profit =0 in perfect competition. So answer is a) Tariff is imposed to increase the price of imported good; Quota restricts the quantity of goods to be imported; voluntary export restraint is an agreement by government to limit thr quanity of good to protect the importing country suppliers. So answer is a) Demand curve is equal to Average revenue curve. As all firms charge the same price irrespective of the quantity sold. So AR=Price. Option b) Diminishing returns occures in the short run as the capital is fixed and if we increase labour with the existing capital then the Marginal productivity of labor will b e reduced. Option c) Answer is b). Firms can't increase or decrease prices in perfect competition. As frims are price takers. But in the long run firms can reduce their costs so their profit will be different. Option b) Option c). If domestic country can produce at lower cost it can sell more. It domestic country's opportunity cost is less then it should produce and export as it is the best way that it can utilise its capital. And of the firm give up least resources then it should produce. Option a). Firm shut down point is where it cannot recover even variable costs. Variable cost = ATC-AFC = 12-1=11. And the price is 10. Firm is loosing additional 1 by producing an additional unit. In all the ther cases it is recovering atleast its variable cost. Option c). If the firms can get materials at lower cost or import some technology then domestic producers can produce more good at lower prices

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