In the short run, in a perfectly competitive market, a firm will shut down if
A. P > AFC for all levels of output.
B. P < ATC for all levels of output.
C. ATC > P > AVC for all levels of output.
D. P < AVC for all levels of output.
Answer: D
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Productive efficiency occurs in perfect competition because the firm produces at the minimum of the: a. average fixed cost curve
b. average variable cost curve c. average total cost curve d. marginal revenue curve.
A firm uses two inputs, labor (L) and capital (K) in the production of umbrellas. It can invest $50,000 in the purchase of the two inputs annually. The firm hires 5 units of capital at $1,000 per unit. If the going annual wage rate is $4,500, calculate the number of workers employed by the firm. (Assume that the firm spends the entire budget on K and L.)
a. 10 b. 5 c. 15 d. 9
Each firm in perfect competition:
A. follows the pricing decisions of other firms. B. follows the output of other firms. C. follows the reactions of competitors. D. sets quantity based on market price.
If all firms in a perfectly competitive industry are experiencing economic losses, then:
A. some firms will exit the industry, until economic profit equals zero. B. all existing firms will stay in the industry, hoping for better times. C. some firms will exit the industry, until accounting profit equals zero. D. some firms will exit the industry, until economic profit is positive.