Question

1. Competitive markets are characterized by

a. The interdependence of firms.

b. A small number of buyers and sellers.

c. Free entry and exit by firms.

d. Unique products.

 

2. A firm that shuts down temporarily has to pay

a. Both its variable costs and fixed costs.

b. Its variable costs but not its fixed costs.

c. Its fixed costs but not its variable costs.

d. Neither its variable costs nor its fixed costs.

 

3. A profit-maximizing firm will shut down in the short run when

a. Average revenue is greater than the average fixed cost.

b. Price is less than the average total cost.

c. Average revenue is greater than marginal cost.

d. Price is less than average variable cost.