micro_week_5[1] - Kelly Jerman Questions for Review 1. A...

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Kelly Jerman Questions for Review 1. A competitive firm is a price taker, wherein its revenue is proportional to the amount of output it produces and the price of the good equals the average revenue and the marginal revenue. 4. A temporary shutdown would occur as a short run decision not to produce anything during a certain amount of time because of current market conditions. By doing this is saves the variable cost of making products. So a firm should temporarily shut down when the revenue it would get from production is less than the variable cost of production, so the firm could not recover its fixed cost. 5. When a firm exits the market it is a long run decision which avoids the price of fixed cost. A firm would choose to exit the market when he firm can recover both fixed and variable cost and the exit price is less than the total average cost. 6. A firm’s price equals marginal cost always, so both in the short and the long run. Profits are at the maximum when marginal cost equals marginal revenue.
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micro_week_5[1] - Kelly Jerman Questions for Review 1. A...

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