What is this firm\'s short-run profit? (A) -$36 (B) $36 (C) -$30 (D) -$35 At wha
ID: 1123982 • Letter: W
Question
What is this firm's short-run profit?
(A) -$36
(B) $36
(C) -$30
(D) -$35
At what quantity (q) is the firm's shutdown point?
(A) When q = 0
(B) When q = 7
(C) When q = 12
(D) None of the above
What will this firm's short-run decision be?
(A) To shut down
(B) To remain open
(C) It is indierent between (A) and (B)
(D) All of the above
What happens in the long-run?
(A) Firms enter, causing prices to go down
(B) Firms exit, causing prices to go up
(C) Firms enter, causing prices to go up
(D) Firms exit, causing prices to go down
In the long-run, what will the equilibrium be?
(A) p = 10, q = 7
(B) p = 5, q = 12
(C) p = 8, q = 7
(D) p = 8, q = 12
The next 5 questions involve the following Figure, which describes a firm in a perfectly competitive industry: Figure 1: PPF ATC MC 10 8 5 MR=P 7 12 QuantityExplanation / Answer
(1) (D)
Profit is maximized in short run when P = MC. In graph, when P = MC = 5, Q = 7 and ATC = 10
Profit = Q x (P - ATC) = 7 x (5 - 10) = 7 x (-5) = -35
(2) (D)
Firm shuts down when Price is less than minimum point of AVC curve The graph does not include AVC curve, so shut down point cannot be determined.
(3) (C)
Firm shuts down in short run when Price is less than minimum point of AVC curve The graph does not include AVC curve, so shut down point cannot be determined. The firm will either continue or shut down, depending on position of the AVC curve.
(4) (B)
Since ATC is above price for all output levels, firm will make loss, which will make some firms exit the market. This will lowewr market supply, increasing market price.
(5) (D)
In long run, Price = TC = MC, which holds true when P = 8 and Q = 12
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.