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5 December, 09:58

If the market price is $16, this firm will a. produce 4 units of output in the short run and exit in the long run. b. produce 5 units of output in the short run and exit in the long run. c. shut down in the short run and exit in the long run. d. produce 5 units of output in the short run and face competition from new market entrants in the long run

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  1. 5 December, 10:22
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    This question is incomplete, I got the complete one from google as:

    Output Total cost

    0 5

    1 10

    2 12

    3 15

    4 24

    5 40

    If the market price is $16, this firm will a. produce 4 units of output in the short run and exit in the long run. b. produce 5 units of output in the short run and exit in the long run. c. shut down in the short run and exit in the long run. d. produce 5 units of output in the short run and face competition from new market entrants in the long run

    Answer:

    Option D is correct - If the market price is $16, this firm will produce 5 units of output in the short run and face competition from new market entrants in the long run.

    Explanation:

    The fixed cost is $5, this indicates that when the market price is $16, the marginal cost is also $16.

    When the 5th unit is produced, the total revenue received will be $80 while the total cost will be $40. This indicates that there will be a positive economic profit which will bring new firms in the long run.

    Hence, option D is the correct answer - If the market price is $16, this firm will produce 5 units of output in the short run and face competition from new market entrants in the long run.
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Home » Business » If the market price is $16, this firm will a. produce 4 units of output in the short run and exit in the long run. b. produce 5 units of output in the short run and exit in the long run. c. shut down in the short run and exit in the long run. d.
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