If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will A. keep producing in the short run but exit the market in the long run. B. shut down in the short run but return to production in the long run C. shut down in the short run and exit the market in the long run. D. keep producing both in the short run and in the long run.

If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will A. keep producing in the short run but exit the market in the long run. B. shut down in the short run but return to production in the long run C. shut down in the short run and exit the market in the long run. D. keep producing both in the short run and in the long run.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter12: Firms In Perfectly Competitive Markets

Section: Chapter Questions

Problem 14P

See similar textbooks

Similar questions

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry: P5 P4 P3 P2 P1 H Q1 Q2 Q3 Refer to the graph above to answe question. Which of the following statements is correct? ATC S
The diagram below, shows the cost structure for a firm in perfect competition. Assume that the market price is £12. What should the firm do in the short- and log run if the price falls to 10? a. It should exit in the short run and also in the long run. b. It should keep operating in the short run but exit in the long run. c. It should keep operating both in the short- and the long run. d. We need more information to decide such an important question.
A profit-maximizing firm in a competitive market is currently producing 500 units of output. It has average revenue of $10, average total cost of $8, and fixed costs of $200. a. What is its profit? b. What is its marginal cost? c. What is its average variable cost? d. Is the efficient scale of the firm more than, less than, or exactly 100 units?
If a profit-maximizing, competitive firm is producinga quantity at which marginal cost is between averagevariable cost and average total cost, it willa. keep producing in the short run but exit themarket in the long run.b. shut down in the short run but return toproduction in the long run.c. shut down in the short run and exit the market inthe long run.d. keep producing both in the short run and in thelong run.
A profit-maximizing firm is producing where MR = MC and has an average total cost of $4, but it gets a price of $3 for each good it sells.a. What would you advise the firm to do? The firm should shut down in the short run and exit the market in the long run. The firm is producing where MR = MC, so it should produce in both the short run and long run. As long as average variable costs are less than $3, in the short run, the firm should produce. In the long run, it should exit the market. The firm should shut down in the short run. Once the firm recoups its fixed costs, it should produce in the long run. b. What would you advise the firm to do if you knew average variable costs were $3.50? The firm should exit the market in the long run, but it should produce in the short run since it is covering average fixed costs. The firm should shut down in the short run. Once the firm recoups its fixed costs, it should reopen in the long run. The firm…
At what point should firms shut down in the short run? a. when marginal revenue equals marginal costs b. when average revenue is below average costs c. when average revenue is above average total cost d. when average revenue is below average variable costs
If firms can easily enter and exit a market, then A. firms will earn zero economic profit in the short run. B. firms will produce at minimum average fixed cost in the long run. C. firms will produce where price is greater than marginal cost. D. firms will produce where price is greater than marginal revenue. E. firms will produce at minimum average cost in the long run.
If a firm in a perfectly competitive industry experiences persistent losses, in the long run it should A. exit the industry. B. continue to operate if it can raise the demand for its product through advertising and quality improvements. C. shut down temporarily and wait for market conditions to change. D. raise its price to cover average total cost.
Consider the following data: equilibrium price = $7.50, quantity of output produced 100 units, average total cost = $9, and average variable cost = $8. What will the firm do and why? = a. Shut down in the short run, because price is below average variable cost. b. Shut down in the short run, because price is below average total cost. c. Continue to produce in the short run, because price is greater than average variable cost. d. Continue to produce in the short run, because firms are always stuck with having to produce in the short run.
Please solve these 3 questions. 1. If the firm is making a positive profit, do you expect it to persist in the long run? Why?2. What is the lowest possible price the firm would be willing to sell for in the short run?3. What is the lowest possible price the firm would be willing to sell for in the long run?
Q. In a perfectly competitive industry, a. Firms earn a breakeven profit in the short-run, but can either make an economic profit or make a loss in the long-run b. None of the above c. Firms can choose whether to produce or shut-down in the short-run d. Firms always charge a price equal to the minimum of AVC in the short-run e. There are high “sunk costs” involved which act as a barrier to entry in this industry
Suppose a perfectly competitive firm is breaking even (profit is equal to zero). In the short run, the firm should ________. In the long run it should ________. a.shut down; expand b.produce where MC = MR; keep the same production level c.shut down; exit the industry d.produce where MC = MR; leave the industry