ECON 200 Lecture Notes - Lecture 15: Marginal Revenue, Marginal Cost, Variable Cost

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greengiraffe718

12 Nov 2018

School

University of Maryland

Department

Economics

Course

ECON 200

Professor

Hossein Abbasi

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Document Summary

Firm"s pro t maximization question: how many units to produce. Reminder: pro t = q * (p - ac) When deciding the quantity to produce, a rm additionally must decide whether to: keep producing, continue in the short-run, but shut down in the long run, shut down in the short run and in the long-run. Three possible cases: revenue per unit (=price) is more than total cost per unit (atc): Keeps producing: revenue per unit (=price) is less than total cost per unit (atc), but more than variable cost per unit (avc): rm loses money. P < afc + avc but p > avc. Fixed costs remain and are sunk in the short-run. The loss per unit is less than the xed cost. So the total loss is less than xed cost. If it shuts down it has to pay the xed cost which is more than loss.

Related Questions

34. All firms in an industry have the same costs. Assume that all other firms in the industry are in short-run equilibrium. However, at the current level of output of one particular firm, AC-MC>P-MR>AVC. If nothing changes, this firm should: (A) decrease its output. (B) increase its output. (C) keep output constant. (D) shut down in the short run. ((E) decrease output in the short run and shut down in the long run. (F) increase output in the short run and shut down in the long run. (G) adjust output until Total Revenue = Total Cost. (H) produce where the marginal cost curve just cuts the demand curve in the short and long run. (1) none of the above.

10-When marginal cost is greater than average total cost,
A. Average total cost must be increasing with output
B. Average variable cost must be decreasing with output
C. Average fixed cost must be increasing with output
D. Marginal cost must be increasing with output

11-If a firm's demand curve falls below its AVC curve, then the firm should
A. Shut down now
B. Operate in the short run but not the long run
C. Set price = marginal cost
D. Shutdown in the long-run

12- The demand curve facing a perfectly competitive firm is
A. Upward sloping
B. Perfectly inelastic
C. Downward sloping
D. Perfectly elastic

13-If the demand curve falls below the ATC curve but lies above AVC, then the firm should
A. Should shut down
B. Operate in the short run but not the long run
C. Set price = marginal cost
D. Operate in the short run and the long run

14-At the output where MC = ATC = P, the perfectly competitive firm
A. Should shutdown
B. Has no economic profit
C. Is not profit maximizing
D. Should raise output

ivorybee159

1.Which one of the following markets has many firms producing a product that is differentiated in nature?

A. Perfect Competition

B. Monopolistic competition

C. Monopoly

D. Oligopoly

2.Which of the following two markets is characterized by the tendency that in the long-run firms will be limited to zero economic profit?

A. Perfect competition

B. Monopoly and Perfect Competition

C. Monopoly and Oligopoly

D. This is a trick question, no firm will produce in the long run with no economic profit

3. If in the short run, a firm's marginal revenue is lower than the average variable cost, we will see the firm do what?

A. Shut down immediately

B. Stay in business but produce less

C. Keep producing in the short run and then shut down

D. Increase output

periwinklewallaby496

ECON 200 Lecture Notes - Lecture 15: Marginal Revenue, Marginal Cost, Variable Cost

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