If the market price is below the minimum average variable cost, a firm will:

$*$

$1$ point

Continue to produce at a loss

Seek to increase market share

Shut down in the short run

Increase production to cover fixed costs

Raise prices to cover costs

Which of the following statements is true regarding the marginal cost curve?

$*$

$1$ point

It is irrelevant in a competitive market

It is always downward sloping

It decreases as output increases

It represents the firm's supply curve above AVC

It is the same as the average total cost curve

Which of the following is NOT a characteristic of perfect competition?

$*$

$1$ point

Free entry and exit

Many buyers and sellers

Price makers

Homogeneous products

Perfect information

If a firm is experiencing losses in the short run, it should:

$*$

$1$ point

Always shut down

Decrease prices to attract more customers

Increase production to reduce losses

Continue to produce if price covers AVC

Reduce output to zero

If a firm in a competitive market is producing at a level where marginal cost exceeds marginal revenue, it should:

$*$

$1$ point

Maintain current output

Shut down immediately

Decrease production

Increase production

Raise prices