Contemplating raising the price

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1. A firm in a perfectly competitive market that is in long run equilibrium is contemplating raising the price of its good so that it can make positive economic profits. Which of the following statements is correct?

a. The firm can make positive economic profit so long as it raises the price above the ATC curve.

b. The firm will make positive profit so long as it produces where MC=MR. c. The firm can make positive economic profit so long as it raises the price above the AVC curve. d. The firm will not be able to make positive economic profit if it raises the price.

2. The following table shows the costs of a T-shirt manufacturer. Use the table to answer this question: If the T-shirt manufacturer is a perfectly competitive firm and if P=2, in the short run the firm will produce: 

Q

MC

AVC

ATC

1

4

4

44

2

2

3

23

3

1

2.3

15.6

4

2

2.2

12.2

5

6

3

11

6

9

4

10.6

7

11

5

10.7

a. 0 units.

b. 4 units.

c. We cannot tell.

d. 2 units.

Reference no: EM131246648

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