Question

Which of the following is true with respect to a perfectly competitive firm? It will make small economic profits always or go out of business A perfectly competitive firm has a perfectly inelastic demand curve At profit maximization the perfectly competitive firm operates where total revenue is maximized as well The perfectly competitive firms supply curve is its marginal cost curve above AVC All of the above are true with respect to a perfectly competitive firm Question 5 1 pts Which of the following is the profit maximizing rule for a perfectly competitive firm? Operate where marginal revenue is equal to marginal cost. Operate where total revenue is maximized. Shutdown in the short run as soon as price rises above average variable cost. Only operate if you can make economic profits in the long run. Operate where marginal product of workers is maximized. Question 6 1 pts A basic distinction between the long run and the short run is that if a firm produces no output in the long run, it still incurs a cost. the opportunity costs of production are lower in the short run than in the long run. in the long run, some inputs are fixed, while in the short run, all inputs are variable. in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.

Answer 1

1.

Answer: the perfectly competitive firms supply curve is its marginal cost curve above AVC.

explanation: it makes zero economic profit in the long run.

it has perfectly elastic demand.

and it maximizes it profit where MR=Mc. and not maximizes its revenue as its marginal revenue equals Price.

in short run MC curve lies above the AVC is supply for firm. firm will produce only when Price is grater than AVC.

2.

operates where marginal revenue equals marginal cost.

explanation: any firm maximizes its profit where MR=MC. because if we produce at MR is greater than MC then, we can earn more profit by producing one more unit. and if MC is greater than MR we are making loss by producing that extra unit.

3.

in the short run complete adjustment of all input is impossible, while in the long run all inputs can be adjust.

explanation: in the short run some inputs are fixed and some are variable but in the long run all inputs are variable.

because in the short run we can not easily change all the inputs which are fixed but in the long run all input can be change.