When are you are you expecting companies to produce in the short run? A. costs equal equal revenue B. price equals marginal revenue C. Average costs equal marginal costs
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A. costs equal equal revenue
B. price equals marginal revenue
C. Average costs equal marginal costs
D.marginal revenue equals marginal cost
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- Do entry and exit occur in the short run, the long run, both, or neither?a. A firm operating in a perfectly competitive market is earning K20 million economic profits. What is the firms accounting profits if the opportunity cost is K30 millionb. What will be the firm’s economic profits in the long run? c. Company ‘A’ has been recording accounting profits averaging K50 million by investing in project C. It could earn K60 million and K70 million in projects D and E, respectively. What is the company’s current economic profit? d. Advise management what to do in the long run e. Project ‘B’ has a net present value of zero after applying a discount rate of 10%, which is the risk adjusted required rate of return that takes into account the riskiness of the project. What return is earned on this project f. After a risk assessment, it is discovered that project ‘B’ has become more risky and the risk adjusted required return to use must be 12%. Will the net present value of project ‘B’ still remain zero?c) Why would a firm that incurs losses choose to produce rather than shut down? Why could this choice be different in the short run compared to the long run?
- c) A certain brand of vacuum cleaners can be purchased from several local stores as well as from several websites. If all sellers charge the same price for the vacuum cleaner, will they all earn zero economic profit in the long run? If all sellers charge the same price and one local seller owns the building in which he does business, paying no rent, is this seller earning a positive economic profit?4.Average variable cost is found by dividing.............. a. variable cost by output b. output by variable cost c. marginal cost by output d. output by marginal cost 5. A profit maximizing firm will increase production a. price is less than marginal cost b. price equals marginal cost c. price exceeds marginal revenue d. price exceeds marginal cost 6. Which statement is true? a. Accounting profits are greater than economic profits. b. Economic profits are greater than accounting profits. c. Accounting profits are equal to economic profits...a. Why is the marginal revenue of a perfectly competitive firm equal to the market price? b. Would a perfectly competitive firm produce if price were less than the minimum level of average variable cost? Why?
- 9. a corn farmer will tend to expand his output as long as the price of corn exceeds aversge variabke cost and: a) marginal cost is smaller than the market price b) marginal revenue is larger than the market price of corn c) marginal revenue is positive d) marginal revenue is kess than the market price of corna) How does imperfect competition differ from perfect competition? b) True or False and explain: If a firm in imperfect competition makes economic profit in the short run they can sustain it in the long run. c) True or False and explain: In imperfect competition all firms charge the same price.Explain how short-run economic profits become long-run economic costs. When profits fall to zero, are owners worse off? Why or why not?
- Price Quantity Total Cost Fixed Cost Variable Cost $10 2000 $24,000 $8000 $16,000 (a) Should this firm shut down in the short run? Explain why or why not in 1-4 sentences. (b) Assume this firm's total costs do not change in the long run. Should this firm exit in the long run? (c) Are your answers to (a) and (b) different?What does it mean to be operating a firm in the "long run?" What does it mean to be operating a firm in the "short run"? What are the practical implications for managing a business if you are in "short run?A computer company produces affordable, easy-to-use home computer systems and has fixed costs of $250. The marginal cost of producing computers is as indicated below. Output Fixed Cost Variable Cost Total Cost Marginal Cost Average Cost Average Variable Cost 1 $250 $700 $950 $700 2 $250 $925 $1175 $225 3 $250 $315 4 $250 $360 5 $250 $400 6 $250 $450 7 $250 $550 If the company sells the computers for $550, is it making a profit or a loss? How big is the profit or loss? If the firm sells the computers for $315, is it making a profit or a loss? How big is the profit or loss? We expect the marginal cost to increase as this firm produces more computers. But when the firm shifts from producing 1 to 2 computers, marginal cost falls. What might explain this?
