Question

When will a profit maximizing firm shut down in the short run?

Group of answer choices

p<min(AC(Q))

p<MC(Q)

p<min(AVC(Q))

Question 2

When will a firm choose to enter an industry in the long run?

Group of answer choices

p>min(AC(Q))

p>min(AVC(Q))

p>AFC(Q)

p>

Answer 1

Question 1

When the profit maximising firm can't get a price which is not enough even to cover it's variable costs, it will choose to shut down in the short run.

So option c is the right answer.

Question 2

A firm will choose to enter the industry when the price is greater than the long run average cost. When this happens, more and more firms are attracted to the market and in the end, the firms in long run will earn zero economic profits at the long run equilibrium P=AC.

Hence option a is the answer.