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8 Jul 2018

34. All firms in an industry have the same costs. Assume that all other firms in the industry are in short-run equilibrium. However, at the current level of output of one particular firm, AC-MC>P-MR>AVC. If nothing changes, this firm should: (A) decrease its output. (B) increase its output. (C) keep output constant. (D) shut down in the short run. ((E) decrease output in the short run and shut down in the long run. (F) increase output in the short run and shut down in the long run. (G) adjust output until Total Revenue = Total Cost. (H) produce where the marginal cost curve just cuts the demand curve in the short and long run. (1) none of the above.

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Hubert Koch
Hubert KochLv2
10 Jul 2018
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Related textbook solutions

Principles of Economics
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ISBN: 9781947172364
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Related questions

25. At the current level of output, a firm faces the following situation: AC > P= MR > MC > AVC. On the basis of this information, we can conclude that: (A) This is a monopoly firm that is currently producing too much output to maximize profit. If nothing changes, it should shut down in the long run. (B) This is a perfectly competitive firm that is currently producing too much output to maximize profit. If nothing changes, it should shut down in the long run. (C) This is a monopoly firm that is currently producing too little output to maximize profit. If nothing changes, it should shut down in the long run. (D) This is a perfectly competitive firm that is currently producing too little output to maximize profit. If nothing changes, it should shut down in the long run. (E) This is a monopoly firm that is producing the profit-maximizing output. It should continue to do what it is doing. (F) This is a perfectly competitive firm that is producing the profit-maximizing output. It should continue to do what it is doing. (G) This is a monopoly firm that is currently producing too much output to maximize profit. It should not necessarily shut down in the long run. (H) This is a perfectly competitive firm that is currently producing too much output to maximize profit. It should not necessarily shut down in the long run. (1) This is a monopoly firm that is currently producing too little output to maximize profit. It should not necessarily shut down in the long run. (J) This is a perfectly competitive firm that is currently producing too little output to maximize profit. It should not necessarily shut down in the long run.

10-When marginal cost is greater than average total cost,
A. Average total cost must be increasing with output
B. Average variable cost must be decreasing with output
C. Average fixed cost must be increasing with output
D. Marginal cost must be increasing with output

11-If a firm's demand curve falls below its AVC curve, then the firm should
A. Shut down now
B. Operate in the short run but not the long run
C. Set price = marginal cost
D. Shutdown in the long-run

12- The demand curve facing a perfectly competitive firm is
A. Upward sloping
B. Perfectly inelastic
C. Downward sloping
D. Perfectly elastic

13-If the demand curve falls below the ATC curve but lies above AVC, then the firm should
A. Should shut down
B. Operate in the short run but not the long run
C. Set price = marginal cost
D. Operate in the short run and the long run

14-At the output where MC = ATC = P, the perfectly competitive firm
A. Should shutdown
B. Has no economic profit
C. Is not profit maximizing
D. Should raise output

Match the following.

constant-cost industry A market structure in which a large number of firms sell a homogenous product or service with no restrictions on entry or exit and each firm is a price-taker.
increasing-cost industry The demand facing a price-taking firm.
long-run equilibrium A firm produces zero output but must still pay its fixed costs.
marginal revenue product Price below which a firm shuts down in the short run.
perfect competition All firms produce where price equals long-run marginal cost, and economic profits are zero.
perfectly elastic demand Industry in which input prices rise as all firms in the industry expand output.
shut down Industry in which input prices remain constant as all firms in the industry expand output.
the shut-down price The additional revenue earned by hiring one more unit of a variable input.

Ā 

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