It\'s easy to determine if a firm is making ling-run production decisions by loo

Question

It's easy to determine if a firm is making ling-run production decisions by looking at its cost structure because, in the long run, a firm does not have any: a. Fixed costs. b. Marginal costs. c. Opportunity costs. d. Variable costs. e. Sunk costs. The market for watches is perfectly competitive and is currently in equilibrium. What will happen if watches become more popular among college students? a. In the short run, firms will incur economic losses, but in the long run, firms will leave the market, bringing economic profits back down to zero. b. In both the short run and the long run, firms will experience zero economic profits. c. In the short fun, firms will experience economic profits, but in the long run, firms will enter the market, bringing economic profits back down to zero. d. In the short run, firms will incur economic losses, but in the long run, firms will enter the market, bringing economic profits back down to zero. e. In the short run, firms will experience economic profits, but in the long run, firms will leave the market, bringing economic profits back down to zero. When talking about economic profits in a perfectly competitive market, the difference between the long run and the short run is that, in the short run, firms: a. Can earn positive economic profits, but in the long run, firms have zero economic profits. b. Earn negative economic profits, but in the long run, firms have positive economic profits. c. Can earn positive or negative economic profits, but in the long run, firms have zero economic profits. d. Can earn positive or negative economic profits, but in the long run, firms have negative economic profits. e. Can earn negative economic profits, but in the long run, firms have zero economic profits. Which of the following conditions will result in the firm making zero economic profits? a. P = AVC b. P P > AVC e. P > ATC

Explanation / Answer

(14) (a)

Fixed costs exist only in short run but not in long run.

(15) (c)

(16) (a)

(17) (c)

Profit = Q x (P - ATC)

So, if P = ATC, Profit = 0

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