AP Microeconomics Prd 2 A Explain Using Graphs or Data Where Appropriate Firms Short Run Decisions to Produce Positive Output Levels or Long Run Questions

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

Exam points

apply P ≥ AVC or TR ≥ TVC to decide whether a loss-making firm produces in the short run
locate the shutdown price at minimum AVC using a table or firm cost-curve graph
explain why producing with AVC < P < ATC covers variable cost and part of fixed cost
distinguish a temporary short-run shutdown from long-run market exit under economic loss
trace positive economic profit through firm entry, higher market supply and a lower price

[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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AP Microeconomics Prd 2 A Explain Using Graphs or Data Where Appropriate Firms Short Run Decisions to Produce Positive Output Levels or Long Run Questions question 1