Question
7) In the short run, if a firm in a perfectly competitive market is producing at a point where price exceeds marginal cost, the profit-maximizing
7) In the short run, if a firm in a perfectly competitive market is producing at a point where price exceeds marginal cost, the profit-maximizing firm
should increase its output.
should decrease its output.
is maximizing its profits.
should not change its output level.
14) If the price is between the minimumATCand the minimumAVC, then a perfectly competitive firm will shut down in order to maximize profit.
True
False
18) The deciding factor that determines whether a firm is operating in the short run versus the long run is whether the
firm has been operating for at least 12 months.
firm has been operating for at least 6 months.
firm's fixed costs are smaller in value than its variable costs.
firm is able to change all factors, including its plant size.
19)The main reason firms in perfect competition do not advertise their product is because
they have no control over the price of their product and would not be able to leverage any brand loyalty.
their product is homogenous and doing so would incur a cost without necessarily increasing their own sales.
the low barriers to entry would encourage new firms to enter the market to take advantage of the free advertising.
there are too many consumers to reach, making their cost of advertising unaffordable.
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