Exam 9: Long-Run Costs and Output Decisions

A perfectly competitive firm, Paula's Pineapple Farm, is incurring a loss. In the short run it should continue to produce if ________, but in the long run, if there is no change in economic conditions, it should exit the industry.

Refer to Scenario 9.10 below to answer the question(s) that follow. SCENARIO 9.10: Investors put up $1,040,000 to construct a building and purchase all equipment for a new cafe. The investors expect to earn a minimum return of 10 percent on their investment. The cafe is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc. The cafe charges $6 on average per meal. -Refer to Scenario 9.10. Weekly total revenue is

A profit-maximizing strategy becomes a loss minimization strategy when a firm in a perfectly competitive industry is producing where

An industry is in ________ if firms have no incentive to enter or exit in the ________ run.

A delivery company lowers its automobile insurance costs as it increases in size because as the size of the fleet of delivery trucks increases, the premium per driver decreases substantially. This is an example of

A firm suffers losses if

For a perfectly competitive industry, a decline in technology will cause

Refer to the information provided in Figure 9.1 below to answer the question(s) that follow. Figure 9.1 -Refer to Figure 9.1. This farmer's shutdown point is at a price of

The Speedy Typesetting Company, a perfectly competitive firm, is currently producing where P = MC and is earning a normal profit. The firm mainly employs minimum wage workers and the government just increased the minimum wage from $7.25 to $9.55 per hour. In the short run, this firm will most likely

Information on MC of production is all that is necessary to obtain the long-run industry supply curve, because P = MC is the profit-maximization condition for all firms.

A firm will choose to shut down rather than operate as long as

Refer to the data provided in Table 9.4 below to answer the question(s) that follow. Table 9.4 q TFC TVC TC MC AVC ATC 0 \ 100 \ 0 \ 100 -- -- -- 1 100 40 140 40 40 140 2 100 60 160 20 30 80 3 100 90 190 30 30 63.33 4 100 124 224 34 31 56 5 100 180 280 56 36 56 6 100 264 364 84 44 60.67 7 100 372 472 108 67.42 -Refer to Table 9.4. If the market price is $34 and the firm produces 4 units of output, then its profit would be

A firm's long-run average cost curve is increasing as output increases over all levels of output. As a result

Refer to Scenario 9.8 below to answer the question(s) that follow. SCENARIO 9.8: Investors put up $1,040,000 to construct a building and purchase all equipment for a new gourmet cupcake bakery. The investors expect to earn a minimum return of 10 per cent on their investment. The bakery is open 52 weeks per year and sells 900 cupcakes per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc. The bakery charges $8 on average per cupcake. -Refer to Scenario 9.8. The bakery is making ________ economic profits per week.

If the price of an input decreases, each individual firmʹs marginal cost curve shifts ________ and the industry supply curve ________.

A firm is earning an economic profit. In the short run the firm should ________. In the long run the firm should probably ________.

Refer to Scenario 9.5 below to answer the question(s) that follow. SCENARIO 9.5: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 percent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $3 on average per meal. -Refer to Scenario 9.5. The weekly economic profit is

A perfectly competitive firm will be operating at its shutdown point if it operates

A firm is experiencing ________ on the downward-sloping portion of a firm's long run average cost curve.

When long-run average costs decrease as a result of industry growth, there are