Consider a perfectly competitive firm for which MC equals ATC at the $10 level, and MC equals AVC at the $8 level. If the market price is $7,
a. the firm can earn an economic profit.
b. the firm will suffer an economic loss but should operate in the short run.
c. the best the firm can do is to break even.
d. the firm should shut down in the short run.
d. the firm should shut down in the short run.
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In the above figure, B is the current long-run aggregate supply curve and E is the current short-run aggregate supply curve. Technological advances mean the long-run aggregate supply curve and short-run aggregate supply curve
A) remain B and E. B) shift to A and D, respectively. C) shift to C and F, respectively. D) shift to C and remain E, respectively.
If the marginal external cost of building a children's playground equals zero, then the
A) marginal private cost equals the marginal social cost. B) marginal social cost equals zero. C) marginal private cost equals zero. D) None of the above answers is correct.
In long-run equilibrium, the perfectly competitive firm produces: a. where P = MC = AC
b. at the lowest point on its long-run average cost curve. c. where its long-run average cost curve is tangent to its horizontal demand curve. d. at a level of output such that all of the above are true.
A single-price monopolist is producing 8,000 units of output. At that level, price equals $10, average total cost equals $12, and average variable cost equals $8 . In addition, both marginal cost and marginal revenue equal $6 . Which of the following statements is correct in the short run?
a. The firm is earning total revenues equal to $96,000. b. The firm could reduce its loss by shutting down. c. The firm has a loss per unit equal to $4. d. The firm is minimizing its economic loss at $16,000. e. The firm is earning an economic profit equal to $16,000.