Question 1

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₃,the firm would produce

Accepted Answer

At price P₃, the firm would produce where its marginal cost curve intersects the marginal revenue curve. This point corresponds to a quantity of Q₃ units.

Question 2

Market supply is found by

Accepted Answer

The answer of Market supply is found by
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Question 3

Ben's Peanut Shoppe suffers a short-run loss.Ben will not choose to shut down if

Accepted Answer

If Ben's Shoppe's total revenue exceeds his variable cost, it means that the Shoppe is covering its variable expenses, such as raw materials and labor costs. Therefore, even if the Shoppe is suffering a short-run loss, Ben could still choose to continue operating since he would be covering at least some of his costs.

Question 4

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄,the firm would produce

Accepted Answer

At the intersection of the demand and marginal cost curves, the firm produces where marginal cost equals marginal revenue, which in a perfectly competitive market is equal to the market price. Therefore, at price P₄, the firm would produce Q₄ units.

Question 5

How are sunk costs and fixed costs related?

Accepted Answer

The answer of How are sunk costs and fixed costs...

Question 6

If a firm shuts down it

Accepted Answer

The answer of If a firm shuts down it
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Question 7

Ted's Pancake Kitchen suffers a short-run loss.When should Ted decide to shut down rather than continue to produce?

Accepted Answer

In short-run decision-making, a firm should shut down if its total revenue is less than its total variable costs. This is because in the short run, the firm cannot change its fixed costs and continuing production will only result in further losses. By shutting down, the firm can minimize its losses to only its fixed costs. Thus, option A is the correct answer.

Question 8

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₃,the firm would

Accepted Answer

The answer of Figure 12-9  Figure 12-9 shows cost...

Question 9

If a firm shuts down in the short run it will

Accepted Answer

If a firm shuts down in the short run, it will suffer a loss equal to its fixed costs. This is because even if the firm is not producing anything, it still has to pay its fixed costs such as rent, insurance, and salaries of permanent employees. By shutting down, it avoids paying variable costs associated with producing output, but it cannot avoid fixed costs. Therefore, the firm will incur these fixed costs as losses if it shuts down.

Question 10

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₂,the firm would

Accepted Answer

At price P₂, the quantity demanded (Q1) is greater than the quantity supplied (Q0), indicating excess demand in the market. This means the firm could increase its price to P and still sell all of its output. At this higher price, the firm would be charging more than its marginal cost (MC), resulting in economic profit. However, at P_{2, the firm is not able to cover its variable costs, which means it would not be able to cover its fixed costs either. Therefore, the firm would rather shut down in the short run and lose an amount less than fixed cost. Thus, the correct answer is C.}

Question 11

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 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 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄,the firm would

Accepted Answer

The answer of Figure 12-9  Figure 12-9 shows cost...

Question 14

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₂,the firm would produce

Accepted Answer

The answer of Figure 12-9  Figure 12-9 shows cost...

Question 15

Figure 12-9  Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.Identify the firm's short-run supply curve.

Accepted Answer

The short-run supply curve for a perfectly competitive firm is the portion of the marginal cost curve above the shutdown point (minimum of the average variable cost curve). In Figure 12-9, the shutdown point is at point B, so the short-run supply curve would be the marginal cost curve from point B and above, which is choice C.

Question 16

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.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, resulting in a loss greater than just the fixed costs.

Question 17

In the short run,a firm that is operating at a loss has two options.These options are

Accepted Answer

If a firm is operating at a loss in the short run, it is most efficient to choose to shut down temporarily as continuing to produce will only increase the losses. Reducing output or reducing variable costs may not be sufficient to cover fixed costs, and going out of business or declaring bankruptcy is not a feasible option if the firm believes it can turn its losses into profits in the long run. Therefore, the best option is to shut down temporarily and reevaluate the situation before resuming production.

Question 18

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

Accepted Answer

If total variable cost exceeds total revenue at all output levels, the firm is experiencing losses in the short run. In such cases, it is advisable for the firm to shut down in the short run, as it will not be able to cover its variable costs. By shutting down, the firm can avoid incurring further losses, and can utilize its resources selectively in the long run.

Question 19

If total revenue exceeds fixed cost,a firm

Accepted Answer

The answer of If total revenue exceeds fixed cost,a firm
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Question 20

Figure 12-9  Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.Identify the short-run shut down point for the firm.

Accepted Answer

The short-run shutdown point for a firm is where the price (P) is below the minimum average variable cost (AVC). In this graph, it is point B where the AVC curve intersects with the marginal cost (MC) curve. At this point, the firm is not able to cover its variable costs and minimize its losses, so it should shut down in the short run. Any output level below point B would result in a greater loss than shutting down, while any output level above point B would result in a loss smaller than shutting down.

Quiz 12: Firms in Perfectly Competitive Markets

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P3,the firm would produce

Market supply is found by

Ben's Peanut Shoppe suffers a short-run loss.Ben will not choose to shut down if

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P4,the firm would produce

How are sunk costs and fixed costs related?

If a firm shuts down it

Ted's Pancake Kitchen suffers a short-run loss.When should Ted decide to shut down rather than continue to produce?

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P3,the firm would

If a firm shuts down in the short run it will

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P2,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 a firm shuts down in the short run

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P4,the firm would

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P2,the firm would produce

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.Identify the firm's short-run supply curve.

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P1,the firm would

In the short run,a firm that is operating at a loss has two options.These options are

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

If total revenue exceeds fixed cost,a firm

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.Identify the short-run shut down point for the firm.

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₃,the firm would produce

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄,the firm would produce

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₃,the firm would

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₂,the firm would

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄,the firm would

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₂,the firm would produce

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₁,the firm would