the firms short run costs contain the firms short run costs contain the firms sh
ID: 1130356 • Letter: T
Question
the firms short run costs contain the firms short run costs contain the firms short run costs contain 6) A basic distinction between the long run and the short run is that A) if a firm produces no output in the long run, it still ncurs a cost. B) the opportunity costs of production are lower in the short run than in the long run. C) in the long run, some inputs are fixed while in the short run all inputs are varia ble. ort run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted. 7) Average fixed costs will A) rise as output rises. C) rise then fall as output rises. B) fall then rise as output rises. D) fall as output rises. 8) When the marginal cost curve is above the average cost curve, the average cost curve is A) at a minimum. B) rising. C) falling. D) horizontal. 9) A merger between firms that are in the same industry is called a A) conglomerate merger C) horizontal merger. B) vertical merger. D) none of the above.Explanation / Answer
6. D)
In short run some factors of production are fixed while other are variable while in long run, all factors are variable.
7. D)
Shape of AFC is downward sloping which means increase in output decreases AFC.
8. B)
When MC is above AC curve then AC is rising.
9. C)
Horizontal merger is merger of firms in the same industry.
10. B)
Profit maximising quantity is where MR = MC i.e. 10,000 units
Profit maximising price is where intersection of MR and MC meets the demand curve i.e. $ 10
11. D)
ATC is less than price so firm is making profit
Profit = (10 - 7) x 10,000 = $ 30,000
12. D)
Total revenue = Price x Quantity = 10 x 10,000 = $ 100,000
13. D)
Price is greater than ATC so firm is making profit.
Profit = (5 - 3) x 150 = 2 x 150 = $ 300
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