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Practice Questions
Test your understanding with targeted questions related to the topic.
Question 1
Easy
What are the two necessary conditions for a firm to sustain short-run production?
💡 Hint: Think about what costs are covered when a firm decides to produce.
Question 2
Easy
Why does a firm exit the market in the long run?
💡 Hint: Consider what happens to profits over time when costs are not covered.
Practice 4 more questions and get performance evaluation
Interactive Quizzes
Engage in quick quizzes to reinforce what you've learned and check your comprehension.
Question 1
What condition must hold for a firm to produce in the short run?
- p < AVC
- p = AVC
- p ≥ AVC
💡 Hint: False income situations can lead to negative profits.
Question 2
True or False: In the long run, if the market price is less than average cost, a firm will exit the market.
- True
- False
💡 Hint: Consider how long-term sustainability plays a role in firm decisions.
Solve and get performance evaluation
Challenge Problems
Push your limits with challenges.
Question 1
A firm faces a price of Rs 25 per unit but has an AVC of Rs 30. What should the firm do in the short run? Provide a rationale for your decision.
💡 Hint: Think about minimizing losses in economic decision-making.
Question 2
If the average cost drops to Rs 10 while the market price stands still at Rs 20, how should the firm react? Calculate potential profit.
💡 Hint: Consider how price and cost interact directly to yield profit.
Challenge and get performance evaluation