Question

A firm will continue to operate in the long run only if:

		it earns a positive rate of return.
		it earns a nonnegative economic profit.
		it makes a positive accounting profit.
		average cost exceeds price.
		the average variable cost exceeds price. A profit-maximizing firm should shut down in the short run if: price is greater than marginal cost. total revenue is less than total variable cost. the firm is earning less than a normal rate of return. the firm is not able to cover its overhead expenses. marginal cost is higher than average cost. The long-run average cost curve slopes upward if there are: a. diseconomies of scale b. economies of scale c. some factors without diminishing marginal returns d. diseconomies of scope in the management of multiplant operations e. no factors without diminishing marginal returns

Answer 1

1) it earns a nonnegative economic profit since in the long run, P=minimum ATC so it will only operate if it is able to recover its total cost

2) total revenue is less than total variable cost. since the firm shuts down if the price is below its minimum AVC which indicates that it is unable to recover its variable cost

3) Diseconomies of scale as it will increase long run average cost curve