Suppose the price of an item in a perfectly competitive market is $20. For a firm in this market, MC = MR at an output of 100 units. The average total cost at this output level is $4 per unit, and TVC is $800. We may conclude that
A. the firm should shut down because other firms will enter the industry as the market is perfectly competitive.
B. the firm should continue to produce because P>AVC.
C. the firm should shut down because its FC is $400 and its TC is $500.
D. the firm should shut down because TC > TR.
Answer: B
You might also like to view...
Mercantilists wanted a favorable balance of trade, by which they meant
a. exports = imports. b. exports > imports. c. exports < imports. d. To import nothing from the colonies.
When Fidel Castro came to power in Cuba in 1959, Cuba's exports were predominantly sugar and tobacco and these exports made up a relatively large part of its economy. To counter this dependence on two goods, Castro's economic advisers used which of the following arguments to persuade him to impose trade restrictions?
a. comparative advantage argument b. infant industries argument c. national security argument d. antidumping argument e. diversity of industry argument
Chelsea wants to start her own Christmas ornament business. She can purchase a suitable factory that costs $100,000 . Chelsea currently has $150,000 in the bank earning 3 percent interest per year. Suppose Chelsea purchases the factory using $50,000 of her own money and $50,000 borrowed from a bank at an interest rate of 6 percent. What is Chelsea's annual opportunity cost of purchasing the
factory? a. $2,000 b. $3,000 c. $4,500 d. $5,000
Which of the following could impede productivity improvements?
A. Technological advances. B. Management training. C. Higher ratios of capital to labor. D. Lack of savings.