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Microeconomics

Lesson 6: Firm entry, exit, and the shut-down rule

Firms’ Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit a Market

AP.MICRO: PRD‑2 (EU), PRD‑2.A (LO), PRD‑2.A.1 (EK) , PRD‑2.A.2 (EK)

The cost and revenue curves for a perfectly competitive industry are shown in this graph:

What is the quantity that this firm will choose in the short run, and what is its economic profit or loss?

(Choice A)
Q, equals, 9, ;, start text, E, c, o, n, o, m, i, c, space, p, r, o, f, i, t, end text, equals, dollar sign, 450
(Choice B)
This firm will shut down in the short run and make an economic profit of 0.
(Choice C)
Q, equals, 11, ;, start text, E, c, o, n, o, m, i, c, space, p, r, o, f, i, t, end text, equals, dollar sign, 0
(Choice D)
Q, equals, 11, ;, start text, E, c, o, n, o, m, i, c, space, p, r, o, f, i, t, end text, equals, dollar sign, 72
(Choice E)
Q, equals, 9, ;, start text, E, c, o, n, o, m, i, c, space, l, o, s, s, end text, equals, minus, dollar sign, 450

Stuck?