Principles of Microeconomics (12th Edition)
12th Edition
ISBN: 9780134078816
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 9, Problem 1.1P
To determine
Whether to agree or disagree with the given statements.
Expert Solution & Answer
Answer to Problem 1.1P
Option (a): Disagree
Option (b): Disagree
Explanation of Solution
Option ‘a’:
A firm which earns a profit in the short run may not necessarily increase its scale of operation in the long run. A firm may expand its production only if it also expects a profit in the long run. If there is no expected positive profit, the firm will not continue its production. Thus, the given statement is disagreed.
Option ‘b’:
The given statement is not true because the firm continues production until the total revenue covers the total variable cost and not the total fixed cost.
Economics Concept Introduction
Fixed cost: Fixed cost is defined as the cost which is independent of the level of output or production of a firm.
Variable cost: Variable cost is defined as the cost which depends on the level of production or output of a firm.
Marginal cost: Marginal cost is defined as the additional cost that is incurred due to the production of an extra unit of output.
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Principles of Microeconomics (12th Edition)
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