Use the graph below to answer the question (Q-29 to Q32) Exhibit 15 Marginal Rev

Question

Use the graph below to answer the question (Q-29 to Q32) Exhibit 15 Marginal Revenue and Cost per Unit Curves 20 15 10 500 1,000 1,500 2,000 Quantity of output (units per week) 0 Q-29) Assume the price of the firm's product in Exhibit 15 is $15 per unit. The firm will produce a. 500 units per week. c. 1,500 units per week. e. 2,500 units per week. Q-30). The lowest price in Exhibit 15 at which the firm earns zero economic profit in the short- b. 1,000 units per week. d. 2,000 units per week. run is a. $5 per unit. b. $10 per unit. c.$20 per unit. d. $30 per unit. Q-31) Assume the price of the firm's product in Exhibit 15 is $10 per unit. The maximum profit the firm earns is a. zero b. $5,000 per week. c. $1,500 per week. d. $10,500 per week. Q-32). Assume the price of the firm's product in Exhibit 15 is $4 per unit. the firm earns is a. zero economic profit. c. $1,500 per week. 0 2 b. economy of scale d. Should Shut down it is operation

Explanation / Answer

Question 29

The price for firm is given. This indicates that firm is a price taker.

A price-taker firm produces that level of output corresponding to which price equals MC.

The price is $15 per unit. The given figure shows that with price being $15 per unit, it is equal to MC corresponding to output level of 2,000 units per week (Point D).

So, the firm will produce 2,000 units per week.

The correct answer is the option (d).

Question 30

A firm earns zero economic profit when price equals ATC.

The lowest price at which the firm earns zero economic profit in the short-run is the price which is equal to minimum ATC.

The minimum ATC is $10.

So, the lowest price at which firm will earn zero economic profit in the short-run is $10 per unit.

The correct answer is the option (b).

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