Economics Study Set 4
Quiz 12: Firms in Perfectly Competitive Markets
If Total Revenue Exceeds Fixed Cost,a Firm
If total revenue exceeds fixed cost,a firm A) should produce in the short run. B) has covered its variable cost. C) is making short-run profits. D) may or may not produce in the short run, depending on whether total revenue covers variable cost.
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If a firm shuts down in the short run, A) its loss equals zero. B) its loss equals its fixed cost. C) is makes zero economic profit. D) its total revenue is not large enough to cover its fixed cost.
A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The fixed cost of production is $20,000.The price of each good is $10.Should the firm continue to produce in the short run? A) No, it should shut down because it is making a loss. B) Yes, it should continue to produce because its price exceeds its average fixed cost. C) Yes, it should continue to produce because it is minimizing its loss. D) There is insufficient information to answer the question.
In the short run,a firm that incurs losses might choose to produce rather than shut down if the amount of its revenue is less than its fixed cost.
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