BUECO5903 Business Economics - Microeconomics Assignment

Question 7:

(a) Explain whether you agree or disagree with the following statement and why: “Regardless of whether the short run or the long run is being considered, a firm should continue to operate as long as its price is greater than its average variable cost”. (5 marks)
(b) Use diagrams to illustrate and explain why you agree or disagree with the following statement: “When marginal revenue equals marginal cost, total cost equals total revenue and the firm makes zero profit”. (2.5 marks for diagram plus 2.5 marks for explanation)