Quiz: Homework 04 If a firm shuts down in the short run, ther Oits economic prof
ID: 1162120 • Letter: Q
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Quiz: Homework 04 If a firm shuts down in the short run, ther Oits economic profits are zero. O its losses are equal to its fixed costs O its operating profits are positive. O it must be the case that its revenues from operating were less than its total costs. Question 24 2 pts The Speedy Typesetting Company, a perfectly competitive firm, is currently producing where P MC and is earning a normal rate of return. The firm mainly employs minimum wage workers and the government just increased the minimum wage from $5.85 to $6.55 per hour. In the short run, this firm will most likely O reduce the amount of output it produces because its cost curves have shifted up and to the left. O continue to produce the same amount of output because only its fixed costs have increased. O produce more units of output to increase revenue to cover the additional fixed costs. O shut down because it will no longer be earning a normal profit.Explanation / Answer
Q23. Answer is Its losses are equal to fixed cost. Q24. Answer is reduce the amount f output it produces because its cost curve have shifted up and to the left. Explanation: As the wages has been increases, the average variabe cost and marginal cost per unit will increase. This will make the MC curve more steeper than before and will cut the MR curve much earlier than current level. This will make the equilibrium output much earlier than at current levels.
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