AP Econ Unit 3
The table above shows a firms total cost of producing various units of output. What is the average variable cost of producing three units?
$7?
Suppose that price in a perfectly competitive industry decreases and it is now below minimum, average total cost but remains above minimum average variable cost. Which of the following will occur in the short run?
Firm will produce the output at which marginal cost equal the new price
Which of the following will most likely lead to zero economic profits
Free/Easy entry and exit of firms
If a profit maximizing firm in a perfectly competitive market chooses to produce in the short-run, the marginal cost is always
Greater than or equal to the average variable cost
Which of the following is true of a firm in a perfectly competitive industry?
It faces a perfectly elastic demand curve
For a perfectly competitive firm producing the profit-maximizing quantity, the average total cost is $10 and the average variable cost is $8. If the market price for its product is $10, which of the following is true for the firm?
It is earning zero economic (normal) profit and will remain in business
Which of the following is true of a perfectly competitive firm in long-run equilibrium
It produces its output at a minimum average total cost
Assume that a perfectly competitive firm is in a long-run equilibrium. If the industry demand for the product increases, how will this firms price, output, and profit change in the short run
Price: increase; Output: increase; Profit:increase
Assume that a firm uses only one variable input. If the firm is experiencing diminishing return, which of the following is true as more of the variable input is used?
Marginal cost will increase
The amount of product Z that must be forgone on order to obtain some amount of product Y is called
Opportunity cost
Assume that a profit-maximizing, perfectly competitive firm has economic losses in the short-run. If the firm continues to produce and sell its goods, then which of the following must be true?
The firm is covering all of its fixed cost but not all of its variable costs of production
In the short run, if a firm produces the level of output at which marginal revenue is equal to marginal cost but MR=D=AR=P is less than average total cost, the firm will
increase output to increase revenue?
A firm is producing the allocative efficient level of output if
price is equal to marginal cost