Question

As long as profits remain positive, a firm will want to increase the quantity produced.? True or False?

A competitive firm faces a downward-sloping demand for its product. True or False?

The annual insurance premiums for Michael’s Machine Shop have permanently risen because of a recent series of thefts by employees, but there is no change in the premiums paid by Michael's competitors. If machine shops are a competitive constant-cost industry, then in the long run

Question 13 options:

1)	Michael's profit will fall to zero.

2)	Michael's Machibe Shop will be driven out of business.

3)	the higher fixed costs will have no effect on Michael's pricing and production decisions.

4)	the demand for service from Michael’s Machine Shop will fall.

Answer 1

1. As long as profits remain positive,a firm will want to increase the quantity produced.

True.

Profit maximization is the short or long run process by which a firm determine the price input and output levels that lead to the greatest profit.

2. A competitive firm faces a downward sloping demand for its product.

True.

Because it reduces its price to sell more units.

3. If machine shops are a competitive constant cost Industry,then in the long run,

The higher fixed costs will have no effect on Michael's pricing and production decisions in the long run.

Then the Michael's firm searches for production technologies that will allow them to use alternative methods of combining inputs and producing Outputs.