Question

16. Assume the current price is Pa and the firm belongs A. firms will exit the industry and the long-run price will B. C. D. Answer the next tea questions on the basis of the information in Figure 1 to a decreasing-cost industry. In the long run: be Ps firms will exit this industry and the long-run price will be greater than P2, but less than P firms will exit this industry and the long-run price will be greater than Ps. the number of firms won't change and price won't change 7. This firm will break even if the product price is: This firm will realize an economic profit if price is: o. This firm will produce at a loss if price is: A.Pr B.P2, С. P), D.Pa Figure 1 10. In the short run, this firm will shut down at any MC price less than: ATC 11. If this firm is in a constant-cost industry, the long AVC run equilibrium price is: 12. In the short run, what would be the price if the firm MR, MR, was indifferent to producing or shutting down? a,a a,a, a 13. Assume the current price is P4 and the firm belongs A. firms will enter the industry and the long-run price will B. C. D. Quantity to an increasing-cost industry. In the long run: firms will enter this industry and the long-run price will be less than P, but greater than Ps firms will enter this industry and the long-run price will be less than P the number of firms won't change and price won't change. 14. Assume the current price is P4 and the firm belongs A. firms will enter the industry and the long-run price will B. C. firms will enter this industry and the long-run price wil D. the number of firms won't change and price won't 15. Assume the current price is P: and the firm belongs to a decreasing-cost industry. In the long run: be Ps. firms will enter this industry and the long-run price will be less than Pa, but greater than Po be less than P change. A. B. C. to an increasing-cost industry. In the long run: firms will exit the industry and the long-run price will be P firms will exit this industry and the long-run price will be greater than P2, but less than P firms will exit this industry and the long-run price will be greater than Ps the number of firms won't change and price won't change. D.

Answer 1

7. C. P3
(Breakeven price is the price at which there is no profit no loss or at which profit = 0. At price P3, output produced is Q3 determined at the point where P3 = MR3 = MC. For quantity Q3, as price = MC = ATC, so there are no profits. Thus, it is the breakeven price.)

8. D. P4
(At price P4, output produced is Q4, determined at the intersection of P4 and MC. For Q4, P4 > ATC. So, there are economic profits.)

9. B. P2
(At price P2, output produced is Q2, determined at the intersection of P2 and MC. For Q2, P2 < ATC. So, there are economic losses and cost exceeds price.)

10. a. P1
(Shutdown price is the price at which AVC is minimum. So, firms will shutdown at any price less than P1)

Note: Post four MCQs at a time.