Refer to the above diagram. At the profit-maximizing output, the firm will realize: A. a loss equal to BCFG. B. a loss equal to ACFH. C. an economic profit of ACFH. D. an economic profit of ABGH. 15. Average fixed cost: A. equals marginal cost when average total cost is at its minimum. B. may be found for any output by adding average variable cost and average total cost. C. graphs as a U-shaped curve. D. declines continually as output increases. 16. A purely competitive firm is precluded from making economic profit in the long run because: A. it is a \"price taker.\" B. its demand curve is perfectly elastic. C. of unimpeded entry to the industry. D. it produces a differentiated product. 17. A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total $900. This firm should: A. shut down in the short run. D. produce because the resulting loss is less than its TFC. C. produce because it will realize an economic profit. D. liquidate its assets and go out of business. 18. Which of the following represents a long-run adjustment? A. a farmer uses an extra dose of fertilizer on his corn crop B. unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants C. a steel manufacturer cuts back on its purchases of coke and iron ore D. a supermarket hires four additional clerks
14. d an economic profit of ABGH
15.a. equals marginal cost when average total cost is at its minimum.
When average total cost is at its minimum, marginal cost is equal to average total cost. Also, when average variable cost is at its minimum, marginal cost equals average variable cost.
16. c. unimpeded entry to the industry.
Purely competitive firms are price takers and make decisions based on marginal cost
17. Produce because the resulting loss is less than its TFC.
Total cost is $1,000. Total revenue is $900. You have $100 loss. Total Fixed cost is $200, so you lost less than the cost. Produce because the resulting loss is less than its TFC
18. Unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants
Long run adjustments is a period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all costs
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