Question
Part 3 of 4
Completed: 15 of 36 My score: 46.5/101 pts (46.04%)
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onsider 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.
Price
Quantity
Variable cost
Fixed cost
Marginal cost of 1,000th unit
Situation 1 Situation 2
Situation 3
$10.00
$10.00
$10.00
1,000
1,000
1,000
$5,000 $5,000 $11,000
$5,000 $6,000 $5,000
$10.00 $10.00 $10.00
In situation 1, the firm should
A. produce 1,000 units of output and have an economic profit of $1.00 per unit.
B. produce 1,000 units of output at a loss since the price is less than the average total cost.
C. produce 1,000 units of output and break even with a price of $10.00.
D. shut down since the price is less than the average variable cost.
In situation 2, the firm should
A. shut down since the price is less than the average variable cost.
B. produce 1,000 units of output at a loss since the price is less than the average total cost.
C. produce 1,000 units of output and have an economic profit of $1.00 per unit.
D. produce 1,000 units of output and break even with a price of $10.00.
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