Question

29. At what price will the firm choose to shut down rather than stay in business? a. $5 b. $6.75 c. $8.50 d. $13 30. In the long run, firms in a perfectly competitive industry a. Produce a level of output that is above allocative efficiency b. Produce where price is equal to average total cost c. Produce where fixed costs are maximized d. Can earn positive economic profit 31. If a firm in a perfectly competitive industry is currently earning positive economic profit, how would you expect the market to change in the long run? a. Firms will enter the market, increasing market supply and decreasing the market equilibrium price until economic profit equals $0. b. Firms will enter the market, increasing market supply and increasing the market equilibrium price until economic profit is positive. c. Firms will leave the market, decreasing market supply and increasing the market equilibrium price until economic profit equals $0. d. Firms will leave the market, increasing market supply and increasing the market equilibrium price until economic profit is $0.

Answer 1

(29) Data is missing

(30) (b)

In long run perfectly competitive equilibrium, Price = MC = ATC, so profit is zero.

(31) (a)

Short run profit will attract new entry, which will increase market supply and decrease market price until each firm earns zero profit.