Comparing the Short- Run and Long- Run Profit- Maximizing Positions

question 68

Multiple Choice

Comparing the short- run and long- run profit- maximizing positions of a perfectly competitive firm,which statement is true?

• A)Price will equal marginal cost in the short run,but not necessarily in the long run.
• B)Price should equal average cost in the long run,but not necessarily in the short run.
• C)The firm will produce at minimum average cost in both the short and long run.
• D)The firm may have unexploited economies of scale in both the short run and the long run.
• E)Economic profit may exist in the short run and in the long run.

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Definitions:

Relevant Range

The range of activity within which assumptions about variable and fixed cost behavior are valid.

Volume of Activity

Refers to the level of operations or the amount of output produced or services rendered in a certain period.

Fixed Cost

Costs that remain constant in total regardless of changes in the level of activity or volume of production.

Sales Increase

An upward change in the quantity or value of goods and services sold by a company, indicating growth in revenue.