18 16 14 12 P=MR: 10 Po MRo 6 4 2 O2 4 68 10 12 14 16 18 20 22 24 26 28 30 32 34 Quantity Utilize the graph above, which illustrates average fixed costs, average variable costs, average total costs, and marginal costs of production for a firm in a perfectly competitive market, to answer the following question. If the price is Po what should the firm do? The firm should decrease production because marginal revenue is greater than marginal cost. Therefore, the firm has not maximized operating profits. O The firm should exit the market because fims will soon enter. This will drive the price below ATC, which will cause the firm to eam economic losses. O The firm should shut down in the long-run because price is below AVC. In the long-run, they will assess the market conditions to see whether they should reopen for business or exit the market They will reopen if price remains below AVC O The firm shoud shut down in the short-run because price is below AVC. In the long-run, they will assess the market conditions to see whether they should reopen for business or exit the market O The fem should increase production because marginal cost is less than marginal revenue. Therefore, the firm has not maximized operating economic profits. Il app.honorlock.com is sharing your screen. Stop sharing Hide E Eom Guidelines N O
18 16 14 12 P=MR: 10 Po MRo 6 4 2 O2 4 68 10 12 14 16 18 20 22 24 26 28 30 32 34 Quantity Utilize the graph above, which illustrates average fixed costs, average variable costs, average total costs, and marginal costs of production for a firm in a perfectly competitive market, to answer the following question. If the price is Po what should the firm do? The firm should decrease production because marginal revenue is greater than marginal cost. Therefore, the firm has not maximized operating profits. O The firm should exit the market because fims will soon enter. This will drive the price below ATC, which will cause the firm to eam economic losses. O The firm should shut down in the long-run because price is below AVC. In the long-run, they will assess the market conditions to see whether they should reopen for business or exit the market They will reopen if price remains below AVC O The firm shoud shut down in the short-run because price is below AVC. In the long-run, they will assess the market conditions to see whether they should reopen for business or exit the market O The fem should increase production because marginal cost is less than marginal revenue. Therefore, the firm has not maximized operating economic profits. Il app.honorlock.com is sharing your screen. Stop sharing Hide E Eom Guidelines N O
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:IV
18
16
14
12
%3D
Pz=MR:
10
PomMR.
4
8 10 12 14 16 18 20 22 24 26 28 30 32 34
Quantity
024 6
Utilize the graph above, which illustrates average fixed costs, average variable costs,
average total costs, and marginal costs of production for a firm in a perfectly competitive
market, to answer the following question.
If the price is Po what should the firm do?
The firm should decrease production because marginal revenue is greater than marginal cost. Therefore, the firm has not maximized operating profits
O The firm should exit the market because firms will soon enter. This will drive the price below ATC, which will cause the firm to eam economic losses.
O The firm should shut down in the long-run because price is below AVC. In the long-run, they will assess the market conditions to see whether they should reopen for business or exit the market.
They will reopen if price remains below AVC
O The firm should shut down in the short-run because price is below AVC. In the long-run, they will assess the market conditions to see whether they should reopen for business or exit the market.
O The frm should increase production because marginal cost is less than marginal revenue. Therefore, the firm has not maximized operating economic profits
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