Principles of Microeconomics Study Set 3
Quiz 6: Perfectly Competitive Supply
The Shutdown Condition Applies
The shutdown condition applies A) in the long run and in the short run. B) only in the short run. C) only to firms that are just breaking even. D) to all firms,all the time.
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Suppose a perfectly competitive firm knows that it is not going to shut down,but it is going to earn a loss.It should pick the output level where: A) total costs are minimized. B) price equals marginal cost. C) total revenues are maximized. D) the costs of the variable factors of production are minimized.
Suppose a firm is collecting $1,250 in total revenues and the total costs of its variable factors of production are $1,000 at its current level of output.The firm has $500 in fixed costs.In the short run,one can predict that the firm will ____ and in the long run the firm will _____. A) shut down;reopen for business B) earn a profit;earn a loss C) earn a loss;earn a profit D) continue to operate;exit the industry
If a firm shuts down in the short run,then: A) total revenue and total cost will fall to zero. B) profit will equal zero. C) profit will equal negative fixed costs. D) profit will equal negative variable costs.
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