ZuoTi.Pro
Question

In the short run, a perfectly competitive firm earning a negative economic profit A) is on...

In the short run, a perfectly competitive firm earning a negative economic profit

A) is on the downward-sloping portion of its AVC.

B) is at the minimum of its AVC.

C) is on the upward-sloping portion of its AVC.

D) is not operating on its AVC.

E) can be at any point on its AVC.

Answer is C, but I have no idea why C is the correct answer.

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer
A perfectly competitive firm produces at MC=P when the P>minimum of AVC.
P>AVC means the MC>AVC which means the AVC is upward sloping.
So a firm maximizing profit or minimizing losses not operate on the downward-sloping portion of the curve.
The minimum point on the AVC is the shutdown point where also the firm will earn negative profit but equal to fixed cost and it is not considered for the analysis as the firm is shut down so the option is irrelevant.
So the firm operating between minimum AVC and minimum ATC on the AVC curve can earn negative economic profit.

Economic profit =(P-ATC)*Q

P<ATC then the firm earn negative profit.


0 0
Add a comment
Know the answer?
Add Answer to:
In the short run, a perfectly competitive firm earning a negative economic profit A) is on...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Please answer the following 3 questions: QUESTION 1 In the short run, the perfectly competitive firm...

    Please answer the following 3 questions: QUESTION 1 In the short run, the perfectly competitive firm will always earn an economic profit when P MC. P ATC. P > AVC P > ATC. QUESTION 2 The demand curve faced by a perfectly competitive industry is horizontal slopes upward. has no slope. slopes downward. QUESTION 3 The short-run supply curve of a perfect competitor is its marginal revenue curve. its marginal cost curve equal to or above the minimum point on...

  • The loss of a perfectly competitive firm which shuts down in the short run: Multiple Choice...

    The loss of a perfectly competitive firm which shuts down in the short run: Multiple Choice O is equal to its total variable costs. O O ь is zero. гето. O is equal to its total fixed costs. cannot be determined. Refer to the diagrams, which show the demand and cost curves for a perfectly competitive firm producing output and the demand and supply curve for the industry in which it operates. Which of the following is correct? ATC AVC...

  • 8. A perfectly competitive firm is earning an economic profit. In the short run it should...

    8. A perfectly competitive firm is earning an economic profit. In the short run it should In the long run it should A. shut down; expand B. produce where MC = MR; leave the industry C. produce where MC = MR; expand production D. shut down; exit the industry 9. In the long-run equilibrium of a competitive market with identical firms, what is the relationship between price P, marginal cost MC, and average total cost ATC? A. P> MC and...

  • For a perfectly competitive firm, marginal revenue equals marginal cost at 250 units of output. At...

    For a perfectly competitive firm, marginal revenue equals marginal cost at 250 units of output. At 250 units, price is greater than average variable cost. It necessarily follows that the Select one: a. marginal cost curve must have an upward-sloping portion and a downward-sloping portion. b. firm must be earning a profit. c. firm should continue to produce in the short run. d. firm should shut down its operation in the short run Next page Seo w

  • Which of the following is true of a profit-maximizing competitive firm in the short run? The...

    Which of the following is true of a profit-maximizing competitive firm in the short run? The firm produces at the point where price is equal to marginal cost. The firm produces at the point where average cost is at its minimum point. The demand curve faced by each firm in the industry is downward sloping. The firm always makes a zero economic profit. The firm suffers a deadweight loss.

  • 14) Which company is most likely to be less efficiently managed? a) U.S. Postal Service b) UPS c)...

    Please answer all multiple choices . i would be very thankful 14) Which company is most likely to be less efficiently managed? a) U.S. Postal Service b) UPS c) FedEx d) AppleS IC AC AVC 30 20 4 10 20 30A 40 50 60 70 80 67 OUTPUT 34 79 The following questions 14 to 16 are based on the above graph 15) The profit-maximizing output is: a) 30 b) 54. c) 60 d) 67 e) 79 16) At the...

  • The demand curve for a perfectly competitive firm options: is upward sloping. is perfectly horizontal. is...

    The demand curve for a perfectly competitive firm options: is upward sloping. is perfectly horizontal. is perfectly vertical. maybe downward or upward sloping, depending upon the type of product offered for sale. In the short run, the best policy for a perfectly competitive firm is to Question 17 options: shut down its operation if the price ever falls below average total cost. produce and sell its product as long as price is greater than average variable cost. shut down its...

  • In the short run, a perfectly competitive firm might earn negative economic profits and then decide...

    In the short run, a perfectly competitive firm might earn negative economic profits and then decide to shut down. On a graph, show this situation, using marginal revenue, marginal cost, average-total-cost, and average-variable-cost curves. Indicate the level of output at which the firm will no longer produce. Explain why your graph shows the shut down point.

  • A perfectly competitive, profit maximizing firm earns zero economic profit in the long run.  The firm’s total...

    A perfectly competitive, profit maximizing firm earns zero economic profit in the long run.  The firm’s total cost is:   TC = a + bQ2.  Use only the cost curve given. Determine mathematically the level of output the firm will produce in the long run. Show mathematically if this amount differs from the amount of output the firm would produce in the short run. Explain why a perfectly competitive firm earns zero economic profit in the long run.

  • 3. A firm in a perfectly competitive market will produce no output in the short run...

    3. A firm in a perfectly competitive market will produce no output in the short run if the price is below $18 but will produce if the price is above $18. The smallest quantity they will produce in the short run is 8. Firms will earn 0 economic profit if the price is $74 and its profit maximizing quantity is 12 at that price. The firm’s fixed cost is $576. Assume the good can be produced in continuous quantities. Draw...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT