short run

Question 1

firm has fixed plant and maximize profits or minimizes losses by adjusting output

Answer 1

short run

Question 2

output can be adjusted only through changes in amount of variable resources it uses

Answer 2

short run

Question 3

the perfectly competitive firm makes two decisions in the short run

Answer 3

whether to produce or to shut down

-if the decision is to produce, what quantity to produce

Question 4

firm should produce that output which maximizes its profits or minimizes its loss

Answer 4

where TR curve exceeds TC curve by largest amount

Question 5

Short run profit maximization

Answer 5

two approaches

• total-revenue-total cost approach
• marginal revenue- marginal cost approach

Question 6

total revenue total cost approach

Answer 6

• should the firm produce?
• what quantity should be produced?
• what profit or loss will be realized?

Question 7

Produce in the short run if it can realize

Answer 7

1-a profit (or)

2-a loss less than its fixed costs

Question 8

shutting down the firm does not eliminate all costs

Answer 8

fixed costs must be paid even if all output ceases

• if a firm makes losses, it cannot pay all its fixed costs and its variable costs
• the firm will lose less by shutting down if losses from continue production exceed fixed costs

Question 9

MR = MC Rule

Answer 9

MR = MC profit maximization in all markets

Question 10

Competitive markets maximize at….

Answer 10

P = MC

Question 11

MR=MC rule

Answer 11

firm will maximize profits or minimize losses by producing at the point at which MR = MC in short run

Question 12

Each firm adjusts output until price =

Answer 12

MC

Question 13

each firms’ supply curve slopes upward as does market supply curve

Answer 13

..

Question 14

higher product prices and MR encourage purely competetive firm to expand output

Answer 14

short run

Question 15

changes in price of variable inputs or technology will shift MC curve

Answer 15

short run