Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
8th Edition
ISBN: 9780134641843
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 15, Problem 4MCQ
To determine
The correct option in case of Firm's shutdown is to be determined.
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In the long run, firms in a competitive marketA.earn positive accounting profit, but zero economic profit.B.earn zero accounting profit and zero economic profit.C.shut down because their accounting profit goes to zero.D.earn negative accounting profit, but positive economic profit.
Perfect Competition
MC - Marginal Cost
MR - Marginal Revenue
ATC - Average Total Cost
AVC - Average Variable Cost
Refer to the figure above. If this firm decides to operate and is producing the profit-maximizing quantity, then the firm's profit will be:
$40
$0
- $40
$240
A pastries company has fixed costs of $250. The marginal cost of producing computers is $700 for the first computer, $250 for the second, $300 for the third, $350 for the fourth, $400 for the fifth, $450 for the sixth, and $500 for the seventh.
First. Create a table that shows the company's output, total cost, marginal cost, average cost,variable cost, and average variable cost.
Second. At what price is the zero-profit point? At what price is the shutdown point?
Third. If the company sells the computers for $500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVC curves to illustrate your answer and show the profit or loss.
Fourth. If the firm sells the computers for $300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVC curves to illustrate your answer and show the profit or loss.
Chapter 15 Solutions
Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
Ch. 15 - Prob. 1SPPACh. 15 - Prob. 2SPPACh. 15 - Prob. 3SPPACh. 15 - Prob. 4SPPACh. 15 - Prob. 5SPPACh. 15 - Prob. 6SPPACh. 15 - Prob. 7SPPACh. 15 - Prob. 8SPPACh. 15 - Prob. 9SPPACh. 15 - Prob. 10SPPA
Ch. 15 - Prob. 11SPPACh. 15 - Prob. 1IAPACh. 15 - Prob. 2IAPACh. 15 - Prob. 3IAPACh. 15 - Prob. 4IAPACh. 15 - Prob. 5IAPACh. 15 - Prob. 6IAPACh. 15 - Prob. 7IAPACh. 15 - Prob. 8IAPACh. 15 - Prob. 9IAPACh. 15 - Prob. 10IAPACh. 15 - Prob. 11IAPACh. 15 - Prob. 1MCQCh. 15 - Prob. 2MCQCh. 15 - Prob. 3MCQCh. 15 - Prob. 4MCQCh. 15 - Prob. 5MCQCh. 15 - Prob. 6MCQCh. 15 - Prob. 7MCQCh. 15 - Prob. 8MCQ
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- 26) The short run supply curve of a firm is a) marginal cost curve b) average total cost curve c) average variable cost curve d) marginal revenue curvearrow_forward1. A firm will shut down in the short run when (check all that apply) a. price is less than average fixed cost b. losses (negative of profits) are greater than fixed costs c. total revenue is less than variable cost d. total revenue is less than total cost e. price is less than average variable cost f. total revenue is less than fixed costarrow_forwardi. Calculate the marginal cost, marginal revenue and profit for each unit of production. ii. How many units should the firm produce to maximise profit?arrow_forward
- (c) Should a firm shut down and why if its revenue is R=$ 1, 000. Its variable cost VC=$ 500 and its sunk fixed cost is F= $ 600. Its variable cost VC=$ 1, 500 and its sunk fixed cost is F= $ 500.arrow_forwardA competitive firm’s short-run supply curve is its cost curve above its cost curve . a. average-total-; marginal- b. average-variable-; marginal- c.marginal-; average-total- d. marginal-; average-variable- Note: don't use chat botarrow_forwardWhen are you are you expecting companies to produce in the short run?A. costs equal equal revenueB. price equals marginal revenueC. Average costs equal marginal costsD.marginal revenue equals marginal costarrow_forward
- Fill in with the correct answer. Your firm has a price of $5, an average total cost of $7, and an average variable cost of $4. Inthe short run, you should__________ (operate/shut down) because ________exceeds___________. Inthe long run, you should ___________(stay in/exit) the market because________ exceeds___________.arrow_forwardIn the short run, a perfectly competitive firm Question 15 options: chooses its optimal plant size. might incur an economic loss is in equilibrium only when its economic profit is zero. will always make an economic profit. Previous PageNext Pagearrow_forwardTulip growing is perfectly competitive and all growers have the same costs. The market price is $25 a bunch, and each grower maximizes profit by producing 2,000 bunches a week. The average total cost is $20 a bunch, and the average variable cost is $15 a bunch. The minimum average variable cost is $12 a bunch. Please draw graphs where necessary. What is the economic profit that each grower is making in the short run? What is the price at the grower’s shutdown point? What is each grower’s economic profit at the shutdown point?arrow_forward
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