Question

12.   If the demand curve of a competitive firm is tangent to the low point on the AVC curve, the firm’s profits are the same whether it shuts down or produces. True or False?

13.   Monopolistic competition is common in
   a.   retail selling
   b.   farming
   c.   basic manufacturing
   d.   electric power generation

14.   The SR market supply curve for a competitive industry is obtained by
   a.   horizontally summing the SRMC curves (above AVC) of all firms in the industry
   b.   vertically summing the supply curves of firms in the industry
   c.   horizontally summing the supply curves of all firms in the industry
   d.   both (a) and (c) above are correct
   e.   none of the above

15.   In the shortrun, total costs are not zero when output is zero because
   a.   marginal costs can be negative at small outputs
   b.   there are some costs that must be paid regardless of the level of output
   c.   profits must be paid to stockholders
   d.   (a) and (b) above are both correct

Answer 1

12. True
13. a. Retail selling
14.   d.   both (a) and (c) above are correct
15. b. there are some costs that must be paid regardless of the level of output
These are fixed cost