PeteP Than its fixed costs. ll-run will continue to operate as long as its reven

Question

PeteP Than its fixed costs. ll-run will continue to operate as long as its revenue is Multiple Choice Questions (4 questions, 4 points each;: Select the best answer for each of the following questions: 5. The change in total utility that Jonathan experiences from eating an aditional ho dog is called a) average utility b) disutility e) marginal utility d) none of the above 6. A competitive firm's supply curve in the short run is a) its marginal cost curve above average variable cost b) its average variable cost curve c) the horizontal sum of the industry's supply curve d) its marginal cost curve above total cost 7. The largest loss a profit-maximizing perfectly-competitive firm experiences in the short run is a) 0, it never loses money if it maximizes profit b) its variable costs c) its fixed costs d) cannot be determined from the information given 8. If costs remain the same for firms in a perfectly competitive industry, what would you expect to happen in the long-run as the result of an increase in demand? a) price will increase b) more firms will enter the industry c) firms will exit d) price will decrease Fill in the blank (1 point each): q AFC TC MC 4 6 84 _ A line that shows all the market baskets (combinations of two goods) that provide a consumer with the same level of satisfaction is called atn), 75 7

Explanation / Answer

5 , c because MU = TU/ X

6, a, because at price below minimum of average cost firm chooses to shutdown.

7,c , because a firm in short run will not cover its fixed cost while it shutdown if it incur loss equals to variable cost.

8 . b, because due to increase in demand firms will see profits and thus more firms will enter .

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