Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / When an economist says that a firm is earning zero economic profit, this implies the firm will have to declare bankruptcy in the near future, unless market conditions change
When an economist says that a firm is earning zero economic profit, this implies the firm will have to declare bankruptcy in the near future, unless market conditions change. True O False
In the short run, a firm in a competitive price-searcher market produces at the point where price is equal to average total cost. True False
An downward-sloping portion of a long-run average total cost curve is the result of diseconomies of scale. True False
In a free market economy, competitive provides firms with a strong incentive to avoid developing improved products and discovering lower cost methods of production True False
1st- False because, zero profit indicates normal profit. So the production cost gets covered. In such a situation there is no chance of bankruptcy.
2nd- False. Because, for perfect competition the short run price level is equal to both average revenue and marginal revenue. And for optimum production price must be equal to marginal cost and greater than marginal cost for the further units. Lastly, when average cost is declining, marginal cost is less than average cost; when average cost is minimum, marginal cost is equal to average cost; and when average cost is rising, marginal cost is greater than average cost. So directly price is related to marginal cost and price is equal to average revenue rather than average cost.
3rd- False. Because, the downward portion of long run average total cost curve simbolise per unit decrease in the cost. So that is definitely beneficial for a producer. Hence, we can never call it diseconomies of scale.
4th- True. Because, perfectly competitive market has same products to choose from. The producers are price takers. So theh can never change the price and without changing price there can be no development of the product. So they tend to avoid the betterment.
