Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 12, Problem 3P
To determine
The short run profit maximizing output is to be determined.
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Should the firm shut down in the short-run? Explain in detail why or why not.
Under what conditions would a firm decide to shut down in the short run but remain invested in the market in the long run? Explain your reasoning.
Why would a firm that is making loss in the short-run choose to operate rather than shut down?
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- Explain the shape of the SR supply curve of a perfectly competitive firm with adiagram. Is the stock market an example of perfect competition? Why or why not?arrow_forwardUnder a PCM, the long run equilibrium situation is that, Economic profit is equal to zero. Is this a breakeven point for all firms in the market? Please explain conceptually.arrow_forwardExplain why it is not economical for a firm to operate under increasing returns and negative returns.arrow_forward
- In long-run equilibrium, all firms in the industry earn zero economic profit. Why is this true?arrow_forwardConsider a firm that has no fixed costs and that is currently losing money. Are there any situations in which it would want to stay open for business in the short run? If a firm has no fixed costs, is it sensible to speak of the firm distinguishing between the short run and the long run?arrow_forwardFor the pizza seller whose marginal, average variable, and average total cost curves are shown below. a. What is the profit maximizing level of output and profit of this firm if the price of pizza is $3.50? b. Below what price will this firm shut-down in the short-run? c. If the price was $4.50, what would this firm's profit be?arrow_forward
- Define perfect competition. Does a firm under perfect competition always make supernormal profit? Explain your answer with appropriate diagrams.arrow_forwardIn the long run, you are given the following: The total revenue curve is TR= -4Q^2 + 28Q +235. The average variable cost curve is AVC = 4Q-36+(100/Q). At what level of output should the firm operate in order to maximize profits?arrow_forward“The firm’s entire marginal cost curve is its short-run supply curve.” Is the preceding statement true or false? Why?arrow_forward
- the short-run supply curve of a perfect competitive firm is the same as that portion of the marginal cost curve, over and above the minimum portion of the AVC. with graphic support carefully proof this .arrow_forwardIf a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be TRUE at that level of output? * a)p ≥ AVC b)MR = MC c)p = MC d)All of this answerarrow_forwardABC company had decreasing returns to scale at all levels of output and it is divided up into 2 equal- size smaller firms, what would happen to its overall profits? Discuss.arrow_forward
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