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AP Microeconomics 3.6 Firms Short Run Decisions to Produce and Long Run Decisions to Enter or Exit a Market Questions

Decide whether a firm operates or shuts down in the short run, then explain how profit opportunities and losses drive long-run entry or exit.

Syllabus
Effective Fall 2022
Course
AP Microeconomics

Exam points

  • compare price with AVC or total revenue with variable cost to make the shutdown decision
  • use cost curves or tables to locate the shutdown price and loss-minimising output
  • explain why a firm may produce at an economic loss in the short run but exit later
  • trace economic profit through entry, an outward market-supply shift and a lower price
  • trace economic loss through exit, an inward market-supply shift and recovery to normal profit

Covered syllabus points

PRD-2.A—Explain (using graphs or data where appropriate) firms’ short-run decisions to produce positive output levels, or long-run…

Question 1

[Maximum number: 1]

Soja Farm is a typical profit-maximizing firm that produces and sells soybeans in a constant-cost, perfectly competitive market that is in long-run equilibrium. The market equilibrium price of soybeans is $ 14 per bushel.

Given the increase in popularity of tofu in part (c), what will happen to the number of firms in the soybean market in the long run? Explain.

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