Econ Chapter 14

Which of the following costs should be ignored by a firm when making production decisions in the short run?

sunk costs.

Profits for a firm can be calculated using which of the following formulas?

(P - ATC)*Q

A firm can exit an industry in the short run. True or False?

False.

For all firm types price equals marginal revenue, and for competitive firms price equals average revenue. True or False?

False.

If P < ATC then economic profits are positive. True or False?

False.

Which of the following would be an example of a firm in a competitive market?

An Iowa corn farmer.

Which of the following is an example of a sunk cost?

The unrecoverable fixed costs associated with production decisions.

It is possible to have positive accounting profit and zero economic profit for a firm. True or False?

True

If P > ATC then economic profits are positive. True or False?

True.

Which of the following correctly describes a firm's entry condition in the long run?

enter if P > ATC.

In a competitive market, an individual firm...

has little to no effect on the market price.

If a firm in a competitive market increases the quantity of output sold, total revenue should...

increase.

Firms in a competitive market are considered price takers because...

no individual buyer or seller can affect the market price.

Which of the following correctly describes when a firm in a competitive market should shut down in the short run?

price is less than average variable cost.

An increase in market demand in a competitive market will have which effect in the short run?

profits for the firm will increase.