Consider a firm in each of the following three situations, and explain whether the firm will produce in the short run or shut down in the short run. In situation 1, the firm should A. produce 1,000 units of output and break even with a price of $10.00. OB. produce 1,000 units of output and have an economic profit of $1.00 per unit. OC. shut down since the price is less than the average variable cost. O D. produce 1,000 units of output at a loss since the price is less than the average total cost. In situation 2, the firm should A. produce 1,000 units of output and break even with a price of $10.00. B. produce 1,000 units of output and have an economic profit of $1.00 per unit. OC. produce 1,000 units of output at a loss since the price is less than the average total cost. OD. shut down since the price is less than the average variable cost. In situation 3, the firm should OA. produce 1,000 units of output at a loss since the price is less than the average total cost. OB. shut down since the price is less than the average variable cost. OC. produce 1,000 units of output and break even with a price of $10.00. OD. produce 1,000 units of output and have an economic profit of $1.00 per unit. Price Quantity Variable cost Fixed cost Marginal cost of 1,000th unit Situation 1 Situation 2 Situation 3 $10.00 $10.00 1,000 1,000 $5,000 $11,000 $10.00 1,000 $5,000 $5,000 $6,000 $5,000 $10.00 $10.00 $10.00
Consider a firm in each of the following three situations, and explain whether the firm will produce in the short run or shut down in the short run. In situation 1, the firm should A. produce 1,000 units of output and break even with a price of $10.00. OB. produce 1,000 units of output and have an economic profit of $1.00 per unit. OC. shut down since the price is less than the average variable cost. O D. produce 1,000 units of output at a loss since the price is less than the average total cost. In situation 2, the firm should A. produce 1,000 units of output and break even with a price of $10.00. B. produce 1,000 units of output and have an economic profit of $1.00 per unit. OC. produce 1,000 units of output at a loss since the price is less than the average total cost. OD. shut down since the price is less than the average variable cost. In situation 3, the firm should OA. produce 1,000 units of output at a loss since the price is less than the average total cost. OB. shut down since the price is less than the average variable cost. OC. produce 1,000 units of output and break even with a price of $10.00. OD. produce 1,000 units of output and have an economic profit of $1.00 per unit. Price Quantity Variable cost Fixed cost Marginal cost of 1,000th unit Situation 1 Situation 2 Situation 3 $10.00 $10.00 1,000 1,000 $5,000 $11,000 $10.00 1,000 $5,000 $5,000 $6,000 $5,000 $10.00 $10.00 $10.00
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider a firm in each of the following three situations, and explain whether the firm will produce in the short run or shut down in the short run.
In situation 1, the firm should
O A. produce 1,000 units of output and break even with a price of $10.00.
O B.
produce 1,000 units of output and have an economic profit of $1.00 per unit.
O C.
shut down since the price is less than the average variable cost.
O D. produce 1,000 units of output at a loss since the price is less than the average total cost.
In situation 2, the firm should
O A.
produce 1,000 units of output and break even with a price of $10.00.
O B.
produce 1,000 units of output and have an economic profit of $1.00 per unit.
O C.
produce 1,000 units of output at a loss since the price is less than the average total cost.
O D. shut down since the price is less than the average variable cost.
In situation 3, the firm should
O A. produce 1,000 units of output at a loss since the price is less than the average total cost.
O B.
shut down since the price is less than the average variable cost.
C. produce 1,000 units of output and break even with a price of $10.00.
O D. produce 1,000 units of output and have an economic profit of $1.00 per unit.
Price
Quantity
Variable cost
Fixed cost
Marginal cost of 1,000th unit
Situation 1 Situation 2
$10.00 $10.00
1,000
1,000
$5,000
$5,000
$5,000
$6,000
$10.00
$10.00
Situation 3
$10.00
1,000
$11,000
$5,000
$10.00
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