Question 7 If market price exceeds A VC but is smaller than ATC, at the profit-m

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Question 7 If market price exceeds A VC but is smaller than ATC, at the profit-maximizing l output, a perfectly competitive firm is: A. Making profit B. Incurring a ring a loss but should continue to produce in the short run ncurring a loss and should stop producing immediately D. Breaking even Question 8 Which model? A. Automobile B. Cigarette of the following industries most closely approximates the perfectly competitive D. Rice Question 9 To determine whether a firm is making a profit at the equilibrium level of output, we need to calculate: A. ATC and AVC B. AVC and AR C. ATC and price D. MR and MC Question 10 A firm's average total cost is $60, its average variable cost is $30, and its total fixed cost is $600. The level of output is: A. 20 units B. 30 units C. 40 units D. 50 units Question 11 All of the following curves are initially downward slopping but then become upward slopping, except: A. The AVC curve B. The AFC curve C. The ATC curve D. The MC curve

Explanation / Answer

7) Option B. As the firm is producing at profit maximizing output but will incurr loss as it is not able to cover ATC. But will continue the production as shut down condition is P<AVC.

8) Newspapers: Homogenous product, price taker.

9) Option c: ATC and price. Profit = P-ATC.

10) 20 units: 60*Q = 30*Q + 600; Q = 600/30 = 20

11) the AFC curve; AFC is continuously decreasing with increasing output

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