A purely competitive firm: A. must earn a normal profit in the short run. B. can

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A purely competitive firm: A. must earn a normal profit in the short run. B. cannot earn economic profit in the long run. C. may realize either economic profit or losses in the long run. D. cannot earn economic profit in the short run. 25. If a firm increases all of its inputs by 10 percent and its output increases by 10 percent, then: A. it is encountering diseconomies of scale. B. it is encountering economies of scale. C. if is encountering constant returns to scale. D. the marginal products of all inputs are falling. 26. Suppose you find that the price of your product is less than minimum AVC. You should: A. minimize your losses by producing where P = MC. B. maximize your profits by producing where P = MC. C. close down because, by producing, your losses will exceed your total fixed costs. D. close down because total revenue exceeds total variable cost. 27. Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were: A. $100,000 and its economic profits were zero. B. $200,000 and its economic profits were zero. C. $100,000 and its economic profits were $100,000. D. zero and its economic loss was $200,000. 28. Which of the following is correct as it relates to cost curves? A. Average variable cost intersects marginal cost at the latter's minimum point. B. Marginal cost intersects average total cost at the latter's minimum point. C. Average fixed cost intersects marginal cost at the latter's minimum point. D. Marginal cost intersects average fixed cost at the latter's minimum point. 29. When diseconomies of scale occur: A. the long-run average total cost curve falls. B. marginal cost intersects average total cost. C. the long-run average total cost curve rises. D. average fixed costs will rise. Answer the next question(s) on the basis of the following cost data:

Explanation / Answer

Answers:

24). C

25). C

26). C

27). D

28). B

29). C

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