16.In the short run, if price is below average total cost (ATC) the firm will:

A)   keep running as long as it is covering its variable costs.

B)   produce more.

C)   raise prices.

D)   face increased competition from new market participants.

17.A competitive firm will tend to expand its output as long as:

A)   its marginal revenue is positive.

B)   the market price is greater than the marginal cost.

C)   its marginal revenue is greater than the market price.

D)   the market price is greater than the marginal revenue.

18.A profit maximizing firm will expand output as long as marginal revenue is:

A)   less than marginal cost.

B)   greater than marginal cost.

C)   less than average variable cost.

D)   greater than average fixed cost.

答案和详解如下：

16.In the short run, if price is below average total cost (ATC) the firm will:

A)   keep running as long as it is covering its variable costs.

B)   produce more.

C)   raise prices.

D)   face increased competition from new market participants.

The correct answer was A)

In the short run, if the firm is covering its average variable costs and some of its fixed costs it will continue to operate as long as the situation is temporary.

17.A competitive firm will tend to expand its output as long as:

A)   its marginal revenue is positive.

B)   the market price is greater than the marginal cost.

C)   its marginal revenue is greater than the market price.

D)   the market price is greater than the marginal revenue.

The correct answer was B)

A competitive firm faces a flat demand curve. This means the price is constant and the marginal revenue line is flat. A firm will continue to produce as long as MR > MC, so the competitive firm will produce as long as P > MC. It will stop when MC = MR = P

18.A profit maximizing firm will expand output as long as marginal revenue is:

A)   less than marginal cost.

B)   greater than marginal cost.

C)   less than average variable cost.

D)   greater than average fixed cost.

The correct answer was B)

A purely competitive firm will tend to expand its output so long as the market price (marginal revenue) is greater than marginal cost. In the short term and long term, profit is maximized when P = MC.