Economics > QUESTIONS & ANSWERS > Firm Level Economics | Modules 5, 6, 7, 8 (All)

Firm Level Economics | Modules 5, 6, 7, 8

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Firm Level Economics | Modules 5, 6, 7, 8 From smallest amount of owners to largest, which of the following orders best represents the different types of firms based upon the average number of owners in those type of firms? Partnerships, sole proprietorships, corporations Sole proprietorships, partnerships, corporations Not enough information to answer Sole proprietorships, corporations, partnerships - ✔✔Sole proprietorships, partnerships, corporations | On average, sole proprietors have one owner, partnerships have several, and corporations have many owners. Since they have no control over price, we know that a perfectly competitive firm in the short run will shut down if economic profits are negative. True False - ✔✔False, the firm shut down only if P < AVC | Firms will continue to produce even with negative profits as long as P is greater than or equal to AVC in the short run. Which of the following factors is a good indicator of the market structure of an industry? Number of owners of each firm in the market Number of firms in the market Number of products in the market Number of consumers in the market - ✔✔Number of firms in the market Suppose all firms in a competitive market are identical. In the long run, entry and exit will guarantee that all firms have: Negative accounting profit Zero marginal cost Zero profit AND negative accounting profit Zero average variable cost Zero profit - ✔✔Zero profit | Zero profit is a necessary condition for long run equilibrium. In the long run, a perfectly competitive firm will always earn zero profits. True False It depends - ✔✔True | Zero profit is a necessary condition for long run equilibrium. Which of the following conditions is always true in short run equilibrium? The quantity of goods demanded in the market is equal to the quantity supplied. Price is always equal to minimum ATC. MR = MC All of (1), (2), and (3) Only (1) and (2) Only (1) and (3) Only (2) and (3) - ✔✔Only (1) and (3) | (1) is true. Supply must equal demand. (2) is false. Price can be more or less than ATC and still produce a short run equilibrium. (3) is true. MR=MC is the profit maximizing rule. Partnerships, unlike sole proprietorships, enjoy limited liability similar to corporations. True False - ✔✔False Suppose a perfectly competitive firm is producing a quantity along the upward sloping portion of its marginal cost curve at a point where marginal cost is greater than price, and it is earning positive economic p

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