A firm is earning an economic profit. In the short run the firm ...

[chandani]

Question 1

Billy Bob's Fertilizer Engineers, a perfectly competitive firm, is incurring a loss, but the price is still above minimum average variable cost. Then in the short run this firm should ________, and in the long run, if there is no change in economic conditions, this firm should ________.

◦ shut down; exit the industry
◦ shut down; expand
◦ produce where 
MR = 
MC; exit the industry
◦ produce where 
MR = 
MC; expand

Question 2

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

◦ shut down; expand
◦ produce where 
MC = 
MR; leave the industry
◦ produce where 
MC = 
MR; expand
◦ shut down; exit the industry

[mochi09]

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[chandani]

Thanks

[mochi09]

Welcome