Question 1

In the short run,if a firm shuts down its maximum loss equals the amount of its fixed cost.

Accepted Answer

In the short run, if a firm shuts down, it still incurs its fixed costs which it cannot recover. Therefore, the maximum loss it can incur is equal to its fixed costs.

Question 2

Max Shreck,an accountant,quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner,Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

Accepted Answer

The lease payment of $4,000 per month is a fixed cost, as it remains constant regardless of the level of business activity in the tattoo parlor.

Question 3

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P₄,the firm would

Accepted Answer

At price P₄, the demand curve intersects the marginal cost curve at point A, which determines the quantity that the firm will produce. At this quantity, the average cost curve is lower than the price, indicating that the firm is making a profit. Therefore, the best choice is B, make a profit.

Question 4

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The fixed cost of production is $20,000.The price of each good is $10.Should the firm continue to produce in the short run?

Accepted Answer

The answer of A perfectly competitive firm produces 3,000 units...

Question 5

If total variable cost exceeds total revenue at all output levels,a perfectly competitive firm

Accepted Answer

If the total variable cost exceeds the total revenue at all output levels, the firm is not even covering its variable costs. In this case, continuing production would only lead to further losses in the short run. Therefore, it is better for the firm to shut down in the short run and minimize further losses.

Question 6

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P₂,the firm would produce

Accepted Answer

At price P₂, the demand curve intersects with the marginal cost curve at point M1, indicating that the profit-maximizing quantity is Q₂. Therefore, the firm would produce Q₂ units.

Question 7

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P₁,the firm would

Accepted Answer

At price P1, the firm is unable to cover its total costs, including both fixed and variable costs, leading to a loss greater than just the fixed costs.

Question 8

In the short run,a firm that incurs losses might choose to produce rather than shut down if the amount of its revenue is less than its fixed cost.

Accepted Answer

The answer of In the short run,a firm that incurs...

Question 9

Max Shreck,an accountant,quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner,Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.Max's explicit cost amounts to $3,000 per month more than his revenue.Should Max continue operating his business?

Accepted Answer

The answer of Max Shreck,an accountant,quit his $80,000-a-year job and...

Question 10

If total revenue exceeds fixed cost,a firm

Accepted Answer

The answer of If total revenue exceeds fixed cost,a firm
...

Question 11

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P₄,the firm would produce

Accepted Answer

At the price of P₄, the demand curve intersects with the marginal cost curve at point A, which indicates that the firm should produce the quantity corresponding to Q₄. This is because producing any lesser quantity would mean not maximizing profits, and producing any larger quantity would mean incurring a higher cost than revenue earned from selling the output. Thus, the best choice for the firm is to produce Q₄ units.

Question 12

If a firm shuts down in the short run,

Accepted Answer

The answer of If a firm shuts down in the...

Question 13

Figure 12-6 
 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-6.Identify the short-run shut down point for the firm.

Accepted Answer

The answer of Figure 12-6 
 Figure 12-6 shows cost...

Question 14

Figure 12-6 
 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-6.Identify the firm's short-run supply curve.

Accepted Answer

The short-run supply curve for a perfectly competitive firm is its marginal cost curve above its minimum average variable cost. In this case, the marginal cost curve from point B and above represents the portion of the curve where the firm's production would be profitable, since it is above the minimum average variable cost at point B. Therefore, the correct choice is C.

Question 15

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P₃,the firm would

Accepted Answer

At price P3, the firm's total revenue equals its total cost, so it breaks even.

Question 16

Market supply is found by

Accepted Answer

The answer of Market supply is found by
...

Question 17

In the short run,if a firm shuts down it avoids its variable cost but not its fixed cost.

Accepted Answer

Shutting down in the short run means the firm stops its production, thus avoiding variable costs. However, the fixed costs still need to be paid in the short run even if the firm is not producing anything.

Question 18

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P₂,the firm would

Accepted Answer

At P₂, the price is below the average variable cost (AVC) but above the average total cost (ATC). This means that the firm is covering its variable costs but not its fixed costs. Therefore, it is losing an amount less than its fixed cost but more than its variable cost. The best choice is C, "lose an amount less than fixed cost."

Question 19

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P₃,the firm would produce

Accepted Answer

At the price P₃, the demand curve intersects with the marginal cost curve at point A, which determines the profit-maximizing quantity to be produced by the firm. This quantity is Q₃, as shown by the vertical dotted line from point A to the quantity axis.

Question 20

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P₁,the firm would produce

Accepted Answer

At price P1, if it is below the firm's average variable cost, the firm would not cover its variable costs and would choose to produce zero units to minimize losses.

Quiz 12: Firms in Perfectly Competitive Markets

In the short run,if a firm shuts down its maximum loss equals the amount of its fixed cost.

Max Shreck,an accountant,quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner,Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P4,the firm would

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The fixed cost of production is $20,000.The price of each good is $10.Should the firm continue to produce in the short run?

If total variable cost exceeds total revenue at all output levels,a perfectly competitive firm

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P2,the firm would produce

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P1,the firm would

In the short run,a firm that incurs losses might choose to produce rather than shut down if the amount of its revenue is less than its fixed cost.

If total revenue exceeds fixed cost,a firm

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P4,the firm would produce

If a firm shuts down in the short run,

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.Identify the short-run shut down point for the firm.

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.Identify the firm's short-run supply curve.

Figure 12-6 Figure 12-6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-6.At price P3,the firm would