AP Micro Unit 3

What should you do?

• Shut Down
• Take loss but stay open
• Stay open, Normal Profit
• Stay open, Positive Economic Profit

Zoe's Bakery determines that P < ATC and P > AVC. Zoe should:

• continue to operate even though she is taking an economic loss.
• continue to operate, as she is making an economic profit.
• shut down immediately, as she is taking an economic loss.
• raise the price until she has maximized her profits.

The demand curve for a perfectly competitive firm is:

• perfectly inelastic.
• perfectly elastic.
• downward sloping.
• relatively but not perfectly elastic.

As output of a firm increases, the difference between the firm’s average total cost and its average variable cost gets smaller because the firm’s

• total cost is increasing
  
• marginal cost is increasing
  
• average fixed cost is decreasing
  
• marginal product of labor is decreasing 

What is the only curve that continues to fall as output increases?

• Average Fixed Cost
• Average Variable Cost
• Average Total Cost
• Marginal Cost

In the short run, the firm will realize an economic loss but will continue to produce if the price is:

• below P2
  
• between P1 and P2 
• between P2 and P3 
• between P3 and P4 

Based on the cost and output data in the table shown, a perfectly competitive firm will shut down if price falls below:

• $15 
• $16
• $18
• $20

What should you do?

• Shut Down
• Stay open and take a loss
• Stay open, Positive Economic Profit
• Stay open, Normal Profit

The short-run supply curve for a firm in a perfectly competitive industry is

• Its entire marginal cost curve

• Its average variable cost curve above its marginal cost curve

• Its average total cost curve above its marginal cost curve

• Its marginal cost curve above the minimum point of its average total cost curve

• Its marginal cost curve above the minimum point of its average variable cost curve

A profit-maximizing firm will shut down in the short run any time the firm’s total revenue is less than its:

• total cost
  
• fixed cost
  
• total variable cost 
• explicit cost