According to the text, what is the distinguishing factor between fixed costs and variable costs in the short run?

Fixed costs remain constant, while variable costs change with output.

Fixed costs are incurred only when there is production, while variable costs must be paid regardless.

Fixed costs are directly related to the quantity of output, while variable costs remain fixed.

Fixed costs are related to long-run production, while variable costs apply to short-run production.

In the short run, why might a firm decide to shut down if the price of its product does not cover average variable costs?

Because the fixed costs are too high.

To minimize losses that would be greater than fixed costs.

What is the break-even point in the context of the text?

The point where a firm starts making a profit.

The point where total revenue equals total variable costs.

The point where total revenue equals total cost.

The point where total cost is minimized.

How are average fixed costs affected as the level of output increases in the short run?

They initially fall and then rise.

Why does the marginal cost (MC) curve have a U-shape in the short run, as mentioned in the text?

Due to the operation of the law of increasing returns.

Because MC is always inversely related to output.

Because MC is directly related to average cost.

Because MC is unaffected by changes in production.

What is the shape of the average variable cost (AVC) curve in the short run, according to the text?

It is a downward-sloping curve.

When is a firm said to be earning normal profit, according to the text?

When average revenue equals average variable cost.

When average cost equals average revenue.

When average cost exceeds average revenue.

When average revenue exceeds average cost.

What are incremental costs, as mentioned in the text?

The costs associated with replacing old assets.

The additional costs incurred for producing an additional batch of output.

The costs of resources for which the firm does not pay a price.

The costs that are actually incurred by a firm.

What is the distinction between private costs and social costs, as explained in the text?

Private costs are borne by individuals or firms, while social costs include external costs borne by society.

Private costs are the total cost to society, while social costs are the costs incurred by individuals or firms.

Private costs include only explicit costs, while social costs include only implicit costs.

Private costs are always higher than social costs.

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