A profit-maximizing firm incurs an economic loss of $30,000 per year. Its fixed cost is $25,000...
A profit-maximizing firm incurs an economic loss of $30,000 per year. Its fixed cost is $25,000 a year. Should the firm produce or shut down in the short run. Suppose instead that the firm has a fixed cost of $35,000 per year. Should the firm produce or shut down in the short run?
Homework Answers
In the first case economic loss is $30,000 per year and its fixed cost is $25,000. In the short run, the business should shut down. If it shuts down, the short run loss will be $25,000, its fixed cost; if it continues to produce, the loss will be $30,000. So it is better to shut down than to incurring more loss which is unfavorable for all businesses.
In the second case fixed cost is $35,000 and the economic loss is $30,000. In the short run, the business should produce. If it shuts down, the short-run annual loss will be $35,000, its fixed cost; but if it produces, the loss will be only $30,000. Each and every business man wish to have a lower margin of loss in case of unfavorable situations. So it should produce in the short run to try to minimise it's loss margin.
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A profit-maximizing firm incurs an economic loss of $30,000 per
year. Its fixed cost is $25,000...
2. A profit-maximizing business incurs an economic loss of S30,000 per month. Its fixed cost is...
2. A profit-maximizing business incurs an economic loss of S30,000 per month. Its fixed cost is S20,000 per month. a) Should this firm produce or shut down in the short run? Explain. Should it stay in the industry or exit in the long run? Explain. b) Suppose instead that this business has a fixed cost of S35,000 per month. Should it produce or shut down in the short run? Explain. Should it stay in the industry or exit in the...
11. A firm sells 30 units of its product at a price of $5 per unit. It incurs a fixed cost of $100 and a variable cost o...
11. A firm sells 30 units of its product at a price of $5 per unit. It incurs a fixed cost of $100 and a variable cost of $20. The firm's profit is ________. a. $50 b. $100 c. $150 d. $30 15. A firm is seeing a $500 loss in the short run. The fixed cost of operation for this firm is $1,000. What is the best decision for this firm in the short run? a. This firm should...
Question 4: Novotel Lotus provides catered meals, and the catered meals industry is perfectly competitive. Novotel...
Question 4: Novotel Lotus provides catered meals, and the catered meals industry is perfectly competitive. Novotel Lotus machinery costs $100 per day and is the only fixed input. The firm's variable cost consists of the wages paid to the cooks and the food ingredients. The variable cost per day associated with each level of output is given in the accompanying table. Quantity of meals VC TC MC AVC ATC $200 $300 $480 $700 $1000 4.1. Calculate the total cost, the...
The following graph shows the demand and cost curves for a perfectly competitive firm. The profit-maximizing...
The following graph shows the demand and cost curves for a perfectly competitive firm. The profit-maximizing firm will: MC ATC // AVC Multiple Choice shut down. ο produce with short-run losses. O produce with long-run economic profits. ο produce with short-run economic profits.
Incorrect uestion 19 0/4 pts Jasu has determined that its profit-maximizing quantity is 10,000 donuts per...
Incorrect uestion 19 0/4 pts Jasu has determined that its profit-maximizing quantity is 10,000 donuts per year. Jasu earns $12,000 in revenue from the sale. He has two costs. First, he pays $16,000 in annual rental payments for its five-year lease on its store. Second Jasu incurs an additional cost of $5,000 for ingredients. Should Jasu shut down in the short run? No, because he can cover all of his variable costs No, because is earning positive economic profit. Yes,...
If a profit maximizing firm has a fixed cost of $3000 and an average variable cost...
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If the price is greater than average total cost at the profit-maximizing quantity of output in...
If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will: options: 1) continue to produce at a loss. 2) produce at a profit. 3) shut down production. 4) reduce its fixed costs.
A firm is seeing a $500 loss in the short run. The fixed cost of operation...
A firm is seeing a $500 loss in the short run. The fixed cost of operation for this firm is $1,000. What is the best decision for this frm in the short run? e This firm should shut down production immediately o This firm should produce more than what it is aurrently producing O This firm should not shut down production in the short run. eThere is not enough information provided to answer. 1 pts Question 16 A firm is...
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Fixed costs are irrelevant in the decision about whether to shut down production in the short run because fixed costs: do not affect, and are not affected by, the quantity the firm produces. can be paid off over time. only change when production changes only change in the short run |If a profit-maximizing perfectly competitive firm shuts down in the short run, it incurs no losses. it incurs an economic loss equal to total fixed cost. its profit equals zero....
Figure 1 7. Referring to Figure 1, if the market price was Ps, the profit- maximizing...
Figure 1 7. Referring to Figure 1, if the market price was Ps, the profit- maximizing (or loss-minimizing) firm will: A. shut down in the short run and incur a loss equal to area P PsAK B. produce output qs, resulting in total revenue equal to area 0PsEqs. total cost equal to area OPsEqs and zero economic profits produce output q, resulting in total revenue equal to area 0PsBq total cost equal to area OP:Fqs and economic profits equal to...
2. A profit-maximizing business incurs an economic loss of S30,000 per month. Its fixed cost is S20,000 per month. a) Should this firm produce or shut down in the short run? Explain. Should it stay in the industry or exit in the long run? Explain. b) Suppose instead that this business has a fixed cost of S35,000 per month. Should it produce or shut down in the short run? Explain. Should it stay in the industry or exit in the...
Question 4: Novotel Lotus provides catered meals, and the catered meals industry is perfectly competitive. Novotel Lotus machinery costs $100 per day and is the only fixed input. The firm's variable cost consists of the wages paid to the cooks and the food ingredients. The variable cost per day associated with each level of output is given in the accompanying table. Quantity of meals VC TC MC AVC ATC $200 $300 $480 $700 $1000 4.1. Calculate the total cost, the...
The following graph shows the demand and cost curves for a perfectly competitive firm. The profit-maximizing firm will: MC ATC // AVC Multiple Choice shut down. ο produce with short-run losses. O produce with long-run economic profits. ο produce with short-run economic profits.
Incorrect uestion 19 0/4 pts Jasu has determined that its profit-maximizing quantity is 10,000 donuts per year. Jasu earns $12,000 in revenue from the sale. He has two costs. First, he pays $16,000 in annual rental payments for its five-year lease on its store. Second Jasu incurs an additional cost of $5,000 for ingredients. Should Jasu shut down in the short run? No, because he can cover all of his variable costs No, because is earning positive economic profit. Yes,...
A firm is seeing a $500 loss in the short run. The fixed cost of operation for this firm is $1,000. What is the best decision for this frm in the short run? e This firm should shut down production immediately o This firm should produce more than what it is aurrently producing O This firm should not shut down production in the short run. eThere is not enough information provided to answer. 1 pts Question 16 A firm is...
Fixed costs are irrelevant in the decision about whether to shut down production in the short run because fixed costs: do not affect, and are not affected by, the quantity the firm produces. can be paid off over time. only change when production changes only change in the short run |If a profit-maximizing perfectly competitive firm shuts down in the short run, it incurs no losses. it incurs an economic loss equal to total fixed cost. its profit equals zero....
Figure 1 7. Referring to Figure 1, if the market price was Ps, the profit- maximizing (or loss-minimizing) firm will: A. shut down in the short run and incur a loss equal to area P PsAK B. produce output qs, resulting in total revenue equal to area 0PsEqs. total cost equal to area OPsEqs and zero economic profits produce output q, resulting in total revenue equal to area 0PsBq total cost equal to area OP:Fqs and economic profits equal to...
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