When profit-maximizing firms in competitive markets are earning profits,
A. market demand must exceed market supply at the market equilibrium price.
B. market supply must exceed market demand at the market equilibrium price.
C. new firms will enter the market.
D. the most inefficient firms will be encouraged to leave the market.
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The accountants hired by Forever Fitness have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, Forever Fitness should
A. shut down because staying open would be more expensive.
B. lower their prices to increase their profits.
C. stay open because shutting down would be more expensive.
D. stay open because the firm is making an economic profit.
In a competitive market the price is $8. A typical firm in the market has ATC = $6, AVC = $5, and MC = $8. How much economic profit is the firm earning in the short run?
A. $0 per unit
B. $1 per unit
C. $2 per unit
D. $3 per unit
The short-run supply curve for a firm in a perfectly competitive market is
A. horizontal.
B. likely to slope downward.
C. determined by forces external to the firm.
D. the portion of its marginal cost curve that lies above its average variable cost.
A firm that shuts down temporarily has to pay
A. its variable costs but not its fixed costs.
B. its fixed costs but not its variable costs.
C. both its variable costs and its fixed costs.
D. neither its variable costs nor its fixed costs.
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