52) Pappy's Popcorn Emporium operates in a perfectly competitive industry and hires you as an economic consultant. Pappy's is currently producing at a point where market price equals its marginal cost. Its market price is less than its average variable cost. You advise Pappy's to A) cease production immediately because it is not covering its operating costs. B) lower its price so that it can sell more units of output. C) produce in the short run to minimize its loss, but exit the industry in the long run. D) raise its price until it breaks even.
52) Pappy's Popcorn Emporium operates in a
A) cease production immediately because it is not covering its operating costs.
B) lower its price so that it can sell more units of output.
C) produce in the short run to minimize its loss, but exit the industry in the long run.
D) raise its price until it breaks even.
53) A firm will ________ in the short run if variable costs exceed revenues.
A) earn a profit
B) produce at a loss
C) break even
D) shut down
54) A perfectly competitive firm's ________ point is the lowest point on its AVC curve.
A) profit maximizing
B) break-even
C) shut down
D) loss maximizing
55) A firm ________ in the short-run has an incentive to expand its long-run scale of operation.
A) breaking even
B) earning positive profits
C) that shuts down
D) making a loss
56) If revenue is less than ________, profit is ________.
A) total cost; negative
B) total fixed cost; positive
C) total variable cost; zero
D) total cost; positive
57) If a firm shuts down in the short run, then
A) its economic profits are zero.
B) its losses are equal to its fixed costs.
C) its fixed costs are greater than its variable costs.
D) its total costs are zero.
58) A firm that shuts down when ________ are less than ________ minimizes its losses.
A) variable costs; fixed costs
B) fixed costs; variable costs
C) revenues; variable costs
D) operating profits; sunk costs
59) A firm is better off operating than shutting down when price adequately covers
A) marginal cost.
B) average fixed cost.
C) average variable cost.
D) marginal revenue.
60) The Razor-Thin Disposable Razor Company is a perfectly competitive firm producing where MR = MC. The current market price of a disposable razor is $3.00. The firm sells 1,800 disposable razors. Its AVC is $4.00 and its AFC is $1.50. What should Razor-Thin do?
A) Continue to produce because price exceeds AFC.
B) Shut down and produce zero razors because price is less than AVC.
C) Decrease production so that AVC will decrease.
D) Increase production so that AFC will decrease.
61) The Razor-Thin Disposable Razor Company is a perfectly competitive firm producing where MR = MC. The current market price of a disposable razor is $3.00. The firm sells 1,800 disposable razors. Its AVC is $2.00 and its AFC is $1.50. What should Razor-Thin do?
A) Continue to produce because price exceeds AVC.
B) Shut down and produce zero razors because price is less than
C) Decrease production so that AVC will decrease.
D) Increase production so that AFC will decrease.
62) The Speedy Typesetting Company, a perfectly competitive firm, is currently producing where P = MC and is earning a normal profit. The yearly licensing fee that this firm must pay for the use of a statistical software program was just increased from $1,000 to $1,200. In the short run, this firm will most likely
A) reduce the amount of output it produces because its cost curves have shifted up and to the left.
B) continue to produce the same amount of output because only its fixed costs have increased.
C) produce more units of output to increase revenue to cover the additional fixed costs.
D) shut down because it will no longer be earning a normal profit.
63) The Speedy Typesetting Company, a perfectly competitive firm, is currently producing where P = MC and is earning a normal profit. The firm mainly employs minimum wage workers and the government just increased the minimum wage from $6.55 to $7.25 per hour. In the short run, this firm will most likely
A) reduce the amount of output it produces because its cost curves have shifted up and to the left.
B) continue to produce the same amount of output because only its fixed costs have increased.
C) produce more units of output to increase revenue to cover the additional fixed costs.
D) shut down because it will no longer be earning a normal profit.
Step by step
Solved in 4 steps
