Question

1. A firm will shut down in the short run if

A. variable costs exceed revenues.

B. total costs exceed revenues.

C. fixed costs exceed revenues.

D. it is suffering a loss.

2. If TR > TC, a firm would ________ in the short run and ________ in the long run.

A. operate; expand

B. operate; contract

C. shut down; expand

D. shut down; contract

3. As long as existing firms ________ in industry, new firms will enter the industry, causing the industry ________ curve to shift to the right

A. earn economic​ profits; supply

B. earn economic​ profits; demand

C. break​ even; demand

D. break​ even; supply

.

Answer 1

a) "A"

If the variable cost of the frim is less than the total revenue then the firm will shut down in the short run.

b) If the TR > TC then the firm is facing a profit, that will allow him to operate in the short run and contract in the long run. the answer is "B" as in the longrun more firms will enter the market.

c) "A"

As long as they are making a profit more and more firm will be entering the market and that will shift the supply curve to the right.