Microeconomic Principles Multiple choise Questions QUESTION 17 Mrs. Smith is ope
ID: 1194104 • Letter: M
Question
Microeconomic Principles Multiple choise Questions
QUESTION 17
Mrs. Smith is operating a firm in a competitive market. The market price is $6.50. At her profit-maximizing level of output, her average total cost of production is $7.00, and her average variable cost of production is $6.00. Which of the following statements about Mrs. Smith’s firm is correct?
Mrs. Smith is earning a loss and should shut down in the short run.
Mrs. Smith is earning a loss but should continue to operate in the short run.
Mrs. Smith is earning a profit since the price is above the average variable cost.
Without knowing Mrs. Smith's marginal cost, we cannot determine whether she should stay in business or shut down.
QUESTION 18
In the figure above, total fixed cost at the profit-maximizing output is
0MHU.
LMHG.
LNJG.
0LGU.
MNJH.
QUESTION 19
Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-3. If the market price is $10, what is the firm’s total cost?
$15
$30
$35
$5
QUESTION 20
In the long run, a firm will enter a competitive industry if
total revenue exceeds total cost.
the price exceeds average total cost.
the firm can earn economic profits.
All of the above are correct.
Mrs. Smith is earning a loss and should shut down in the short run.
Mrs. Smith is earning a loss but should continue to operate in the short run.
Mrs. Smith is earning a profit since the price is above the average variable cost.
Without knowing Mrs. Smith's marginal cost, we cannot determine whether she should stay in business or shut down.
Explanation / Answer
ANS 17: Mrs. Smith is earning a loss but should continue to operate in the short run.
ANS 20: All of the above.