Answer the following statements true (T) or false (F)
1. When a competitive firm sees losses because the product falls below the minimum average cost of production at its current plant, it may decide to expand if there are economies of scale.
2. When a competitive firm sees the price fall below the minimum possible average total cost in the long run, then it will decide that it could do better by moving to a different industry.
3. Suppose that a competitive firm finds that in its short-run equilibrium situation, its marginal cost is higher than its average total cost. If things are not expected to change and there are constant returns to scale, then the firm will exit the industry in the long run.
4. It is possible for a competitive firm that is maximizing profits in the short run to make its profits even bigger in the long run by expanding its plant.
5. In long-run equilibrium, a competitive firm produces where P = MR = MC = minimum ATC and the firm earns normal economic profits.
1. TRUE
2. TRUE
3. TRUE
4. TRUE
5. TRUE
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The amount by which people will increase or decrease their purchases when prices change
A) is typically greater in the case of luxuries than in the case of necessities. B) is typically less for business firms than for households because business firms can more easily borrow to maintain purchasing patterns. C) is typically less for business firms than for households because business firms must have certain goods to remain in operation. D) tends to be greater over longer periods of time because it takes time to invent and to discover substitutes. E) will be approximately zero unless the demand also changes.
Liquidity refers to the availability of cash, or other assets that can be quickly converted to cash, to meet obligations
a. True b. False Indicate whether the statement is true or false
Demand and Cost Data for Sylvie's Shampoo CompanyTable 26.2A Monopolistically Competitive FirmPriceDemand Data QuantityCost Data OutputTotal Cost$2266$96$2077$104$1888$114$1699$126$141010$140Refer to Table 26.2. At the profit-maximizing output and price, Sylvie's Shampoo Company. will earn a ________ economic profit, and ________ the market will occur.
A. negative; exit from B. positive; entry into C. negative; entry into D. positive; exit from
Everything else equal, if the dollar depreciates against the Chinese yuan:
A) China will stop trading with the U.S. B) China will import more from the U.S. and will export less to the U.S. C) China will export more to the U.S. and will import less from the U.S. D) the Chinese government will buy yuan from the foreign exchange market.