Question 1

short run

Accepted Answer

the time period over which some factors of production are fixed. Typically, we assume that capital is fixed in the short run so that a firm cannot change its scale of operations (plant and equipment) over the short run.

Question 2

long run

Accepted Answer

All factors of production (costs) are variable in the long run. The firm can let its leases expire and sell its equipment, thereby avoiding costs that are fixed in the short run.

Question 3

variable cost and breaking even economics

Accepted Answer

if a business has some fixed costs like a lease and some quazi fixed costs like an employee, the variable costs would be the merchandise. they need to be able to sell the merch to cover both fixed and variable costs. This would mean that the profit would be zero but at least they break even in the long run the firm should shut down if the price is less than the total cost, regardless of the relation between price and average variable cost

Question 4

behavior under perfect competition

Accepted Answer

perfect comp - all competitors offer same product many firms, identical products low barriers to entry price takers maximize profits MR = MC

Question 5

behavior under imperfect comp

Accepted Answer

- another word for market monopoly - single price / price discrimination - downward sloping demand curve (price down, QD up) - maximize profits MR = MC

Question 6

subnormal profit

Accepted Answer

loss

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MODULE 12.1 Breakeven, Shutdown, and Scale Flashcards

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