Question

When a perfectly competitive firm is earning profits in the short run, at the quantity produced,...

When a perfectly competitive firm is earning profits in the short run, at the quantity produced,

price > average cost
the firm's demand curve slopes downward
minimum AVC > price
existing firms will exit the market in the long run
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

When the firm is earning profits in the short run the existing price in the market should be more than the average total costs of production. If the price is greater than ATC than the firm will earn positive economic profits. If the price equals the ATC, than the firm earns normal profits and if P< ATC the firm will suffer losse. The firm will continue operations if the price is less than ATC but more than minimum of AVC.

Thus the correct answer should be price> Average Cost.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. All of the following are characteristics of perfectly competitive markets, except: A: No barriers to...
1. All of the following are characteristics of perfectly competitive markets, except: A: No barriers to entry or exit (fully mobile) B: Large number of buyers & sellers C: A homogeneous product (not differentiated) D: Individual firms have the power to control price. 2. The individual firm's demand curve (as compared to the market demand curve) in a perfectly competitive market is: A: Perfectly inelastic (vertical) B: Downward sloping, but inside of the market demand curve. C: Perfectly elastic (horizontal...
1. For a firm in a perfectly competitive industry, short-run and long-run economic profits must be...
1. For a firm in a perfectly competitive industry, short-run and long-run economic profits must be zero. short-run economic profits must be zero. both short-run and long-run economic profits may be negative. short-run economic profits may be positive, but long-run economic profits must be zero. 2. At a market clearing price, the quantity demanded will just equal the quantity supplied. the demand function will shift outward. there will be a tendency for price to rise over time. there will be...
Wheat is produced under perfectly competitive conditions. Individual wheat farmers have U-shaped long-run average cost curves...
Wheat is produced under perfectly competitive conditions. Individual wheat farmers have U-shaped long-run average cost curves that reach a minimum average cost of $4 per bushel when 2,000 bushels are produced. a) Suppose that the market demand curve for wheat is given by Q = 2,600,000 - 200,000P. In long-run equilibrium, what will be the equilibrium price, quantity, and number of wheat producers? b) Suppose market demand shifts outward to Q = 3,200,000 - 200,000P. If farmers cannot adjust their...
Wheat is produced under perfectly competitive conditions. Individual wheat farmers have U-shaped long-run average cost curves...
Wheat is produced under perfectly competitive conditions. Individual wheat farmers have U-shaped long-run average cost curves that reach a minimum average cost of $4 per bushel when 2,000 bushels are produced. a) Suppose that the market demand curve for wheat is given by Q = 2,600,000 - 200,000P. In long-run equilibrium, what will be the equilibrium price, quantity, and number of wheat producers? b) Suppose market demand shifts outward to Q = 3,200,000 - 200,000P. If farmers cannot adjust their...
1. For a perfectly competitive firm in the short run, the ____________ price is at minimum...
1. For a perfectly competitive firm in the short run, the ____________ price is at minimum average variable cost and the break-even price is at minimum ________ cost.    a. Shut-down: Marginal b. Shut-down: Average c. Operating: Average d. Operating: Marginal 2. The short-run supply curve for a perfectly competitive firm is a _______ line at zero quantity if the price is below minimum average variable cost but is the marginal cost if the price is at or above minimum...
32.   The relationship that indicates that the perfectly competitive firm in long-run equilibrium is economically efficient...
32.   The relationship that indicates that the perfectly competitive firm in long-run equilibrium is economically efficient is that A.   long-run marginal cost equals long-run average cost at long-run average cost’s lowest value. B.   the typical firm earns neither economic profits nor economic losses. C.   marginal benefit equals long-run marginal cost. D.   demand equals marginal revenue equals average revenue equals price. 33.   The perfectly competitive lobster market is in long-run equilibrium. Following an increase in demand we would expect the typical...
1) A perfectly competitive firm's short-run supply curve is its: A. average variable cost curve above...
1) A perfectly competitive firm's short-run supply curve is its: A. average variable cost curve above the marginal cost curve. B. marginal cost curve above the average fixed cost curve. C. marginal cost curve above the average total cost curve. D. marginal cost curve above the average variable cost curve. 2)Economic Profit A. (per unit) is price minus average variable cost. B. is correctly described by all of these. C. as a total amount, is (P - ATC) times quantity....
Long-run equilibrium for a perfectly competitive firm is expressed by which of the following equations? a....
Long-run equilibrium for a perfectly competitive firm is expressed by which of the following equations? a. MC = LRAVC = SRAVC b. MC = MR = LRAC = SRATC c. MR = MC = SRAVC = SRATC d. MC = MR = SRTC = AFC Free market entry is defined by which of the following? a. Markets do not charge firms a fee to enter. b. There is no cost for firms to enter into a market. c. Firms with...
A firm in a perfectly competitive market is making profits. a. is this the short run...
A firm in a perfectly competitive market is making profits. a. is this the short run or the long run? b. what is likely to happen in the market and to this firm as time goes by?
10.   The widget industry is perfectly competitive. The lowest point on the long-run average cost curve...
10.   The widget industry is perfectly competitive. The lowest point on the long-run average cost curve of each of the identical widget producers is K4, and this minimum point occurs at an output of 1,000 widgets per month. When the optimal scale of a firm’s plant is operated to produce 1, 150 widgets per month, the short run   average cost of each firm is K5. The market demand curve for widgets Is. QD   = 150, 000 – 5,000 P Where...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT