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A perfectly competitive firm will produce at an economic loss (negative profit) in the short run rather than discontinue production if there is a rate of output at which the price:

a. exceeds the average variable cost

b. exceeds the average fixed cost

c. exceeds the average total cost

d. equals marginal cost

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Divya Singh
Divya SinghLv10
8 Nov 2020
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Related questions

1.Profit maximizing firms should increase output to the point where:

a.Total revenue is largest

b.Total revenue just exceeds total costs

c.An increase in revenue is just offset by an increase in cost.

d.Fixed costs are covered

e.Total cost is minimized

2.The Golden Rule of Output Determination for a perfectly competitive firm is to:

a.Choose the output rate at which price is greatest.

b.Choose the output rate at which marginal revenue equals marginal cost.

c.Produce to the point of diminishing marginal returns

d.Produce until total revenue exceeds total cost.

e.Choose the output rate at which total cost is the lowest.

3.Which of the following conditions would indicate that a perfectly competitive firm should expand output to increase its profit?

a.Marginal cost equals average cost

b.Total cost exceeds marginal cost

c.Price exceeds marginal cost

d.Total revenue exceeds total costs

e.Total revenue equal price

4. It would not pay a firm to produce anything in the short run if the price were:

a.Above average total costs

b.Equal to marginal cost and above the average variable cost.

c.Equal to total revenue divided by output

d.Below average variable cost

e.Below marginal average cost

Suppose Robin's Clock Works produces in a perfectly competitive market. Suppose the average total cost of clocks is $95, the average variable cost of clocks is $90, and the price of clocks is $85. If the firm is producing the level of output where marginal cost equals price, then in the short-run, the firm:

A) can increase profit by increasing output.
B) is earning a positive economic profit.
C) should continue to produce since total revenue exceeds the total variable cost.
D) should shut down.

In the long run, a firm will exit a competitive industry if
 
a. total revenue exceeds the total cost.
 
b. the price exceeds the average total cost.
 
c. The average total cost exceeds the price.
 
d. Both a and b are correct.

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