Question

7) Governments grant patients to A) compensate firms for research and development costs B) encourage competition. C) encourage low prices D) encourage firms to reveal secret production techniques E) cely firms that operate in that country, Qty TC TVC 0 10000 100 1360360 Table 200 1560 560 12 -1 300 1960 960 400 2760 760 500 4000 3000 600 5800 4800 Table 12-1 shows the short code fa perfectly competitive for that produces plastic camera Caes. Assume that our canly be increased in Baches of 100 unit. Hint You may wish to determine come addional informon from what has been provided 6) Refer to Take 2-1. What is the five cost of production? A) SO B $500 C) S1.000 D) It cannot be determined what is the profit 9) Refer to Talle -If the market price of each camera case is maximizing quantity? A 200 units 3) 300 600 units at the optimal quantity of 10) Refer to take . If the market price of each camera case is output what is the firm's total revenue? A) $1600 B) $2.400 C$200 D 54000 E) 54,800 and the firm maximizes 11) Refer to Table 12-. If the market price of each camera case is profit, what is the amount of the firm's profit or loss? A) $0 it breaks even) B) loss of 51.000 C) pot of 5440 D) loss of 5440 E) none of the above 12) Roer to Take 12.1. Suppose the fixed cost of production rises by 5500 and the price per unit is still St What happens to the firm's profi-aximizing output level? A) It must fall B) It must rise to offset the increased cost C) It will remain the same D) The firm will shut down in the short run E) The firm will shut down in the long run 13) Refer Tote 2-1. The firm will not produce my output in the short run if the price falls A) D 3.20 5230

Answer 1

Qty	TC	TVC	MC	ATC	AVC
0	1000	0	-	-
100	1360	360	3.60	13.60	3.60
200	1560	560	2.00	7.80	2.80
300	1960	960	4.00	6.53	3.20
400	2760	1760	8.00	6.90	4.40
500	4000	3000	12.40	8.00	6.00
600	5800	4800	18.00	9.67	8.00

8. Fixed cost of production = Total Cost at zero output = $1,000

Ans: C

9. Given,

Price = $8

Profit-maximising quantity is the output at which the marginal cost = price

From the above table, we obtain that MC = $8 when output = 400 units

Ans: C

10. Total Revenue(at profit-maximising quantity) = Price x Output = $8 x 400 = $3,200

Ans: C

11. When output = 400 units

Total Cost = $2,760

Total Revenue = $3,200

Profit = Total Revenue - Total Cost = $3,200 - $2,760 = $440

Ans: C

12. The profit-maximising output level depends on the marginal cost and the price. The marginal cost is not affected by a change in the fixed cost as the total fixed costs are constant at any output and hence, any change in the fixed costs does not affect the profit-maximising output

Ans: C

13. In the short-run, the firm continues to produce as long as the price remains equal to or above the minimum average variable cost. If the price falls below the minimum AVC, the firm shuts down

From the above table, we observe that the minimum AVC = $2.80 and hence the shut-down price = $2.80

Ans: E