5) In the short run 5) _______ A) firms will shut down if operating at a loss. B
ID: 1105540 • Letter: 5
Question
5) In the short run 5) _______
A) firms will shut down if operating at a loss.
B) firms may choose to operate at a loss.
C) most firms have short run supply curves that are the same as their long run supply curves.
D) profit maximizing firms have identical short run supply curves.
7) If market price is greater than or equal to the minimum of AVC but below the minimum of AC, then 7) _______
A) the firm will shut down.
B) profit is positive and so the firm will operate.
C) revenue is lower than variable costs.
D) the firm will operate because its loss is less than if it shut down.
8) In the long run equilibrium, profits will equal zero in a competitive market because of 8) _______
A) free entry and exit.
B) identical products being produced by all firms.
C) the availability of information.
D) constant returns to scale.
9) A firm will enter a competitive market when 9) _______
A) the long-run supply curve is upward sloping.
B) it can gather market share at the expense of incumbent firms.
C) it can earn a positive long-run profit.
D) it would not be the last firm entering.
10) Like the short run 10) ______
A) firms operate only if they make a positive profit.
B) the maximum number of firms in the market is fixed.
C) the long run supply curve is the sum of the individual firms' supply curves.
D) All of the above.
Explanation / Answer
Ans)
5.
A) firms will shut down if operating at a loss.
Firms will shut down if they are not even covering variable costs.
7)
D) the firm will operate because its loss is less than if it shut down.
8)
A) free entry and exit.
Free entry ensures that all excess profits are absorbed by the new firms.
9)
B) it can gather market share at the expense of incumbent firms.
Firms will enter the market until profits are driven to zero.
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