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“When the firms in the industry are just able to cover their cost of production, economic profit is zero. Therefore, if demand falls, causing prices to go down even a little bit, all of the firms in the industry will be driven out of business.” True or false? Explain.

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Nestor Rutherford
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Principles of Economics
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Related questions

“When the firms in the industry are just able to cover their cost of production, economic profit is zero. Therefore, if demand falls, causing prices to go down even a little bit, all of the firms in the industry will be driven out of business.” True or false? Explain.

“When the firms in the industry are just able to cover their cost of production, economic profit is zero. Therefore, if demand falls, causing prices to go down even a little bit, all of the firms in the industry will be driven out of business.” True or false? Explain.

1. Productivity is defined as the quantity of

a. labor required to produce a nation's GDP.

b. goods and services produced per unit of time.

c. labor required to produce one unit of goods and services.

d. goods and services produced from each unit of labor input.

 

2. When market conditions in a competitive industry are such that firms cannot cover their total production costs, then

a. the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits.

b. all firms will go out of business since consumers will not pay prices that enable firms to cover their total production costs.

c. some firms will exit the market, causing prices to rise until the remaining firms can cover their total production costs.

d. the firms will suffer long-run economic losses.

 

 

 

 

 

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