1a. The market is in long-run equilibrium if: There are no new firms entering the markets,...
1a.
The market is in long-run equilibrium if:
-
There are no new firms entering the markets, but firms will high costs may exist.
-
Firms are earning zero economic profits.
-
Firms are charging the market price.
-
Firms are earning economic profits
1b.
The following information is relevant for an individual firm operating in a perfectly competitive market.
| Output | 30 |
| Variable Cost | $2,700 |
| Fixed Cost | $130 |
| Marginal Cost | $80 |
| Price | $80 |
What will be the firm's production decision in the short-run?
-
Exit
-
Operate
-
Other firms will enter into the market
-
Shutdown
Homework Answers
Ans) the correct option is b) Firms are earning zero economic profits.
Ans) the correct option is d) shutdown
AVC = 2700/30 = 90
Price = 80
Since price is less than AVC, firm will not be able to cover its variable costs so the firm will shut down
Add Answer to:
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