### Cost Structure Analysis in a Competitive Market**Table: Firm's Cost Structure**| Output | Total Cost ||--------|------------|| 0 | $5 || 1 | $10 || 2 | $12 || 3 | $15 || 4 | $24 || 5 | $40 |**Analysis Scenario**Given a market price of $4, evaluate the firm's production decisions:- **Option a:** Produce two units in the short run and exit in the long run.- **Option b:** Produce three units in the short run and exit in the long run.- **Option c:** Produce four units in the short run and exit in the long run.- **Option d:** Shut down in the short run and exit in the long run.### ExplanationThis exercise analyzes how a firm in a competitive market decides its production level and whether to continue operations based on cost and market price.

25. A firm in a competitive market has the following cost structure: Output Total Cost $5 $10 $12 $15 $24 $40 1 3 4 5 If the market price is $4 this firm will a. produce two units in the short run and exit in the long run b. produce three units in the short run and exit in the long run c. produce four units in the short run and exit in the long run d. shut down in the short run and exit in the long run

25. A firm in a competitive market has the following cost structure: Output Total Cost $5 $10 $12 $15 $24 $40 1 3 4 5 If the market price is $4 this firm will a. produce two units in the short run and exit in the long run b. produce three units in the short run and exit in the long run c. produce four units in the short run and exit in the long run d. shut down in the short run and exit in the long run

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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