How does the long-run supply curve differ from the short-run supply curve for a perfectly competitive firm? Explain your answer
What will be an ideal response?
In the short run, if price falls to a point on the marginal cost curve that lies below average variable cost curve, then the firm should shut down. The firm's short-run supply curve is therefore the portion of its marginal cost curve that lies above average variable cost curve. In the long run, however, the supply curve is the portion of its marginal cost curve that lies above average total cost. This is because all costs are variable in the long run. Hence, when price falls below the minimum average cost, it becomes unprofitable for the firm to continue operations and the firm exits the industry.
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Chuck owns a factory that produces leather footballs. His total fixed cost equaled $86,000 last year. His total cost equaled $286,000 last year. Hence Chuck's
A) total variable cost was zero. B) incurred an economic loss. C) total variable cost equaled $200,000. D) total variable cost equaled $372,000. E) None of the above answers is correct.
Based on Table 9.1, the balance on the financial account is
A) +100. B) +200. C) 0. D) -100. E) -200.