SOLVED

11) Refer to Figure 9-6. At price P3, the firm would A) lose an amount equal to its fixed cost. B) lose an amount more than fixed cost. C) lose an amount less than fixed cost. D) break even. 12) Refer to Figure 9-6. At price P4, the firm would produce A) Q3 units. B) Q4 units. C) Q5 units. D) Q6 units. 13) Refer to Figure 9-6. At price P4, the firm would A) lose an amount equal to its fixed cost. B) make a profit. C) lose an amount less than fixed cost. D) make a normal profit. 14) Refer to Figure 9-6. Identify the short-run shut down point for the firm. A) a B) b C) c D) d 15) Refer to Figure 9-6. Identify the firm’s short-run supply curve. A) the marginal cost curve B) the marginal cost curve from a and above C) the marginal cost curve from b and above D) the marginal cost curve from d and above 16) Market supply is found by A) vertically summing the relevant part of each individual producer’s marginal cost curve. B) horizontally summing the relevant part of each individual producer’s marginal cost curve. C) vertically summing each individual producer’s average total cost curve. D) horizontally summing each individual producer’s average total cost curve. 17) If total variable cost exceeds total revenue at all output levels, a perfectly competitive firm A) should produce in the short run. B) is making short-run profits. C) should shut down in the short run. D) has covered its fixed cost. 18) If total revenue exceeds fixed cost, a firm A) should produce in the short run. B) has covered its variable cost. C) is making short-run profits. D) may or may not produce in the short run, depending on whether total revenue covers variable cost. 19) If a firm shuts down in the short run, A) its loss equals zero. B) its loss equals its fixed cost. C) is makes zero economic profit. D) its total revenue is not large enough to cover its fixed cost. 20) A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of production is $20,000. The price of each good is $10. Should the firm continue to produce in the short run? A) No, it should shut down because it is making a loss. B) Yes, it should continue to produce because its price exceeds its average fixed cost. C) Yes, it should continue to produce because it is minimizing its loss. D) There is insufficient information to answer the question. 21) In the short run, a firm that incurs losses might choose to produce rather than shut down if the amount of its revenue is less than its fixed cost. 22) In the short run, if a firm shuts down it avoids its variable cost but not its fixed cost. 23) In the short run, if a firm shuts down its maximum loss equals the amount of its fixed cost. 24) The minimum point on the average variable cost curve is called the loss-minimizing point. 25) If a firm’s fixed cost exceeds its total revenue, the firm should stop production by shutting down temporarily. 26) Under what conditions should a competitive firm shut down in the short run? 27) Use a graph to show the demand, AVC, ATC, MC, and MR curves of a firm that should temporarily shut down in the short run. Identify the shutdown point on the graph.