21. Should a firm shut down immediately if it is making losses?

22. How does the average variable cost curve help a firm know whether it should shut down immediately?

23. What two lines on a cost curve diagram intersect at the shutdown point?

24. Why does entry occur?

25. Why does exit occur?

26. Do entry and exit occur in the short run, the long run, both, or neither?

27. What price will a perfectly competitive firm end up charging in the long run? Why?

28. Will a perfectly competitive market display productive efficiency? Why or why not?

29. Will a perfectly competitive market display allocative efficiency? Why or why not?

Critical Thinking Questions

30. Finding a life partner is a complicated process that may take many years. It is hard to think of this process

as being part of a very complex market, with a demand and a supply for partners. Think about how this

market works and some of its characteristics, such as search costs. Would you consider it a perfectly
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