Econ final

Question 1

In the short run, what is the firm’s shutdown point?

Answer 1

It is the minimum point on the average variable cost curve

Question 2

In the long run, what is the firm’s shutdown point?

Answer 2

the minimum on the average total cost curve

Question 3

Why are firms willing to accept losses in the short run but not the long run?

Answer 3

There are sunk costs in the short run. but not the long run

Question 4

What is the relationship between a perfectly competitive firm’s marginal cost curve and its supply curve

Answer 4

They are equal for prices above the AVC curve

Question 5

How is the market supply curve derived from the supply curve of individual firms?

Answer 5

by horizontally adding the individual frims supply curves

Question 6

In the long run, in a competitive equilibrium, a firm earning zero economic profit will do what

Answer 6

Continue to produce because of the positive accounting profit