If price is between the shutdown and break-even points, in the short run the fir
ID: 1199530 • Letter: I
Question
If price is between the shutdown and break-even points, in the short run the firm will _____ and in the long run the firm will _____.
operate; go out of business
operate; stay in business
shut down; go out of business
shut down; stay in business
We say that a business is operating at peak efficiency when its __________ is held to a minimum.
average total cost
average variable cost
maginal cost
price
In the short run if price is below average variable cost the firm will
go out of business.
stay in business.
shut down
operate
Under perfect competition there are
a few firms producing a differentiated product.
many firms producing an identical product
a few firms producing an identical product.
many firms producing a differentiated product.
A perfect competitor would
never charge above market price but might charge below market price.
never charge below market price but might charge above market price
always charge market price.
never charge market price.
To maximize profits, a firm should produce at an output up to the point where
the difference between price and marginal cost is at its maximum.
total cost equals total revenue
price equals marginal cost.
total revenue equals variable cost.
The minimum possible average total cost of a computer repair shop is $40 and the minimum possible average variable cost is $30. If you operate this shop, you will shut it down immediately if the equilibrium price of computer repairs falls below
$40
35$
30$
20$
10$
Explanation / Answer
1 A Operate and go out of the business because in the short run firm can operate evenif it is incurring losses as long as losses are less than fixed cost but in the long run all costs must be recovered in order ot continuation of operations.
2. Average total cost is at its minimum because minimum cost means maximum profits.
3. Shut down because if I ma not able to recover my variable costs, it does not make sense to continue production.
4. many firms producing an identical product under perfect competition there are large number of buyers and seller and product is homogeneous os that no buyer can distinguish th eproduct of firm A from product of firm B.
A perfect competitor would
Always charge market price because it is not sensible to charge low or high price as demand is perfectly elastic.
To maximize profits, a firm should produce at an output up to the point where
price equals marginal cost in case of perfect competition but in case of monopoly or imperfect form so fmarket it should be where MC = MR
The minimum possible average total cost of a computer repair shop is $40 and the minimum possible average variable cost is $30. If you operate this shop, you will shut it down immediately if the equilibrium price of computer repairs falls below
$30 because variable cost must be recovered in order ot continue production.
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