Question 1

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 shut down point for a firm is where the marginal revenue (MR) curve intersects the average variable cost (AVC) curve. This occurs at point B in the diagram, where the price is below the minimum point of the AVC curve. At this point, the firm would minimize its losses by shutting down in the short run.

Question 2

Marty's Bird House suffers a short-run loss.Marty can reduce his loss below the amount of his total fixed costs by continuing to produce if his revenue

Accepted Answer

Marty can reduce his loss in the short run by continuing to produce only if his revenue exceeds his variable costs. This is because his fixed costs cannot be changed in the short run and he must cover them regardless of whether or not he produces. If his revenue exceeds his variable costs, then he can at least cover his variable costs and some portion of his fixed costs, reducing his overall loss.

Question 3

If a firm shuts down it

Accepted Answer

The answer of If a firm shuts down it
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Question 4

If a firm shuts down in the short run

Accepted Answer

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

Question 5

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 firm's marginal cost (MC) is greater than the price (P2), so producing and selling a unit of output would result in a loss equal to the difference between P2 and MC. However, the firm still generates some revenue by selling its existing output. Thus, the firm incurs a loss less than its fixed cost. Therefore, the best choice is C.

Question 6

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 7

How are sunk costs and fixed costs related?

Accepted Answer

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

Question 8

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 answer of  Figure 12-9 shows cost and demand...

Question 9

Market supply is found by

Accepted Answer

The answer of Market supply is found by
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Question 10

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 11

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

At price P2, the firm would produce where the marginal cost (MC) equals the price (P2) because this would maximize profit. This occurs at the intersection of the MC and the marginal revenue (MR) curves, which occurs at output level Q2. Therefore, the answer is A) Q2 units.

Question 12

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 marginal cost (MC) equals marginal revenue (MR), which is typically represented by Q3 in such diagrams.

Question 13

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

Accepted Answer

In the short run, if Ted's Pancake Kitchen is suffering a loss, he should continue producing as long as his revenue is covering his variable costs. This is because in the short run, he still has to pay his fixed costs regardless of whether he shuts down or not. Therefore, if his revenue is less than his variable costs, it means that his contribution margin is negative, and he is better off shutting down and minimizing losses.

Question 14

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 shows cost and demand...

Question 15

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

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

Question 16

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

Accepted Answer

In the short run, if a firm is operating at a loss, it should choose to shut down temporarily rather than reducing output or variable costs. This is because reducing output or variable costs may lead to further losses for the firm. By shutting down temporarily, the firm would avoid incurring any fixed costs and would only incur variable costs when it resumes production in the future. Continuing to produce would also lead to further losses since the firm is already operating at a loss. Therefore, shutting down temporarily is the best option for a firm that is operating at a loss in the short run.

Question 17

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

Accepted Answer

If a perfectly competitive firm's total variable cost exceeds its total revenue at all output levels, it means the firm is not even covering its variable cost. In this case, the firm should shut down in the short run in order to minimize losses. This is because continuing to produce would result in a larger loss from paying the variable cost without earning enough revenue to cover it. Therefore, shutting down in the short run is the best choice.

Question 18

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 shows cost and demand...

Question 19

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

Accepted Answer

In the short-run, businesses may experience losses. However, they will continue to operate if their total revenue is sufficient to cover their variable costs. This is because the fixed costs are unavoidable in the short-run and shutting down the business would lead to a loss greater than if they continue to operate and cover as much of their variable costs as possible. Thus, if Ben's Peanut Shoppe's total revenue exceeds his variable cost, he will not choose to shut down.

Question 20

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 fixed costs cannot be avoided in the short run, and shutting down means the firm will no longer generate revenue to cover those costs. However, the variable costs can be avoided by shutting down, so the loss will only be equal to the fixed costs.

Quiz 12: Firms in Perfectly Competitive Markets

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.

Marty's Bird House suffers a short-run loss.Marty can reduce his loss below the amount of his total fixed costs by continuing to produce if his revenue

If a firm shuts down it

If a firm shuts down in the short run

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?

How are sunk costs and fixed costs related?

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.

Market supply is found by

If total revenue exceeds fixed cost,a firm

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

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

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

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

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

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

If a firm shuts down in the short run it will