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Individual Supply Curve in the Short Run and Long Run quiz

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  • In the short run, when does a perfectly competitive firm decide not to shut down?
    A firm does not shut down in the short run when the price is greater than the average variable cost (AVC).
  • What portion of the marginal cost (MC) curve represents the firm's short-run supply curve?
    The short-run supply curve is the portion of the MC curve above the minimum AVC.
  • At what price does a firm produce zero output in the short run?
    A firm produces zero output at any price at or below the minimum average variable cost (AVC).
  • How is the firm's supply curve in the short run formed?
    It is formed by all the points where price is above AVC and marginal revenue equals marginal cost.
  • What happens if the market price falls below the minimum AVC in the short run?
    The firm shuts down and produces zero output.
  • In the long run, when does a firm decide not to exit the market?
    A firm does not exit the market in the long run when the price is greater than the average total cost (ATC).
  • What portion of the MC curve represents the firm's long-run supply curve?
    The long-run supply curve is the portion of the MC curve above the minimum ATC.
  • At what price does a firm produce zero output in the long run?
    A firm produces zero output at any price at or below the minimum average total cost (ATC).
  • How does the firm's supply curve in the long run differ from the short run?
    In the long run, the supply curve starts at the minimum ATC, while in the short run it starts at the minimum AVC.
  • What is the shutdown point for a firm in the short run?
    The shutdown point is the price equal to the minimum AVC.
  • What is the exit point for a firm in the long run?
    The exit point is the price equal to the minimum ATC.
  • Why might a firm produce at a loss in the short run?
    A firm may produce at a loss if the price is above AVC but below ATC, covering variable costs but not all fixed costs.
  • What condition must be met for a firm to make a profit in the long run?
    The price must be greater than the average total cost (ATC).
  • Where does a firm choose its output level in both the short run and long run?
    A firm chooses its output where marginal revenue equals marginal cost (MR = MC).
  • What happens to the firm's supply curve at prices below the shutdown or exit point?
    The supply curve is vertical at zero output for all prices below the shutdown (short run) or exit (long run) point.