ECN 102 Lecture Notes - Lecture 23: Sunk Costs, Decision Rule
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Match the following.
constant-cost industry | A market structure in which a large number of firms sell a homogenous product or service with no restrictions on entry or exit and each firm is a price-taker. |
increasing-cost industry | The demand facing a price-taking firm. |
long-run equilibrium | A firm produces zero output but must still pay its fixed costs. |
marginal revenue product | Price below which a firm shuts down in the short run. |
perfect competition | All firms produce where price equals long-run marginal cost, and economic profits are zero. |
perfectly elastic demand | Industry in which input prices rise as all firms in the industry expand output. |
shut down | Industry in which input prices remain constant as all firms in the industry expand output. |
the shut-down price | The additional revenue earned by hiring one more unit of a variable input. |
As long as profits remain positive, a firm will want to increase the quantity produced.
Question 3 options:
1) True | |
2) False |
Question 4 (1 point)
Only variable costs are relevant to a firm's decision to shut down.
Question 4 options:
1) True | |||||||||||||||||||||||||||||||||||||
2) False A competitive firm faces a downward-sloping demand for its product. Question 1 options:
|