Home / Questions / When a firm decides to shut down in the short run, its losses are limited to its fixed co
When a firm decides to shut down in the short run, its losses are limited to its fixed costs.
74) Assume a firm is currently producing 800 units of output, P = $10, MC = $10, ATC = $8, and AVC = $6. In this case, the firm is maximizing its profit, which equals $1,600.
75) Assume a firm is facing the following situation: At Q = 1,000, P = $10, MC = $10, ATC = $18, and AVC = $16. This firm should shut down and, in so doing, limit its losses to $2,000.
76) The perfectly competitive firm's supply curve is that portion of the marginal cost curve that lies above the firm's average total cost curve.
77) If the level of output produced by the firms in a perfectly competitive market has no effect on the prices of the inputs used by the firms, the market supply curve will be flatter than the supply curve for an individual firm in the market.
78) In the short run, a perfectly competitive firm can earn positive, zero, or negative profit depending on the market price of the firm's output.
79) In the model of the perfectly competitive firm, the firm's fixed costs are equal to its implicit costs of production.
80) Assume the market price is greater than average total cost at the perfectly competitive firm's profit-maximizing level of output. In this case, the firm is earning positive economic profits, which act as an incentive for new firms to enter the market.
81) When the firms in a perfectly competitive market are incurring economic losses, some of the firms will exit the market, causing the supply curve to shift left and market price to rise until losses incurred by the remaining firms are eliminated.
82) Assume there is a decrease in the supply of a product produced in a perfectly competitive market. All else constant, in the short run this will cause the profits of firms that produce substitutes for the good in question to increase.
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