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31) Refer to Figure 9-1. The diagram shows cost curves for a perfectly competitive firm. If the market price is P2, the profit-maximizing firm in the short run should A) produce output B. B) produce output C. C) produce output D. D) produce output E. E) shut down, as it is incurring losses.

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Related questions

25) If a perfectly competitive firm is producing an output at which price is equal to average total cost, the firm A) is making an economicprofit. B) is not producing its profit-maximizing quantity. C) is breaking even. D) should shut down. E) is incurring an economic loss.

16. At the current level of output, a firm faces the following situation: P> AC > MC > MR. 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. 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. It should shut down in the long run. (C) This is a monopoly firm that is currently producing too little output to maximize profit. 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. 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 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 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 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 shut down in the long run.

11. [3 Marks] Assume no change in the LRATC.? All firms in a perfectly competitive market have access to the same technology and input prices. Production entails a $1000 per period fixed cost. A firm sells 1000 units a price of $10, incurring an average of $8 per unit in variable costs. A. The firm must increase output to increase short-run profits. B. The firm must decrease output to increase short-run profits. C. Assuming this firm is maximizing short run profits, it will produce less in future periods as the market price will decrease in the long run. D. Assuming this firm is maximizing short run profits, it will produce more in future periods as the market price will increase in the long run. E. Assuming this firm is maximizing short run profits, it will continue to produce 1000 units in the long run.

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