Table 11-3
$\begin{array}{|c|c|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Variable } \
\text { Cost (dollars) }
\end{array} & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 21 & \$ 0 & \$ 0 & \$ 50 \
\hline 1 & 20 & 20 & 16 & 66 \
\hline 2 & 19 & 38 & 31 & 81 \
\hline 3 & 18 & 54 & 45 & 95 \
\hline 4 & 17 & 68 & 59 & 109 \
\hline 5 & 16 & 80 & 75 & 125 \
\hline 6 & 15 & 90 & 93 & 143 \
\hline 7 & 14 & 98 & 112 & 162 \
\hline 8 & 13 & 104 & 140 & 190 \
\hline 9 & 12 & 108 & 180 & 230 \
\hline 10 & 11 & 110 & 230 & 280 \
\hline
\end{array}$ Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 11-3.What is the best course of action for the firm in the short run?
A) It should shut down.
B) It should stay in business because it covers some of its fixed cost.
C) It should increase its sales by lowering its price.
D) It should not cut its price but it should increase its sales by advertising.

Question

Table 11-3
 $\begin{array}{|c|c|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Variable } \
\text { Cost (dollars) }
\end{array} & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 21 & \$ 0 & \$ 0 & \$ 50 \
\hline 1 & 20 & 20 & 16 & 66 \
\hline 2 & 19 & 38 & 31 & 81 \
\hline 3 & 18 & 54 & 45 & 95 \
\hline 4 & 17 & 68 & 59 & 109 \
\hline 5 & 16 & 80 & 75 & 125 \
\hline 6 & 15 & 90 & 93 & 143 \
\hline 7 & 14 & 98 & 112 & 162 \
\hline 8 & 13 & 104 & 140 & 190 \
\hline 9 & 12 & 108 & 180 & 230 \
\hline 10 & 11 & 110 & 230 & 280 \
\hline
\end{array}$ Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 11-3.What is the best course of action for the firm in the short run?
A) It should shut down.
B) It should stay in business because it covers some of its fixed cost.
C) It should increase its sales by lowering its price.
D) It should not cut its price but it should increase its sales by advertising.

Quizplus · Accepted Answer

In the short run, the firm should stay in business because it is able to cover its variable costs and some of its fixed costs, as its total revenue exceeds its total variable costs. However, it is not maximizing profit at its current output level. If it were to increase output, it could potentially increase revenue and lower its average variable cost, leading to higher profits. Therefore, option C is also a possibility for the firm in the short run, but it would depend on the specific circumstances and demand elasticity. Option A is not the best course of action as it would not cover any of the fixed costs and lead to a loss equal to its fixed costs. Option D may not be effective as advertising alone may not significantly increase sales for a monopolistically competitive firm.

Table 11-3 Table 11-3 Shows the Demand and Cost Schedules for a Price