Question : 92) Under which of the following conditions will a profit-maximizing : 1241195

92) Under which of the following conditions will a profit-maximizing perfectly competitive firm shut down in the short run?

A) when it is making a normal profit

B) whenever its marginal cost is less than its marginal revenue

C) when the price is less than its minimum average variable cost

D) whenever its total cost is greater than its total revenue

E) when the price is less than its minimum average total cost

93) A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the

A) marginal revenue is greater than marginal cost.

B) price is at least equal to the minimum average variable cost.

C) total fixed costs are less than total revenue.

D) marginal cost is minimized.

E) price is also less than the minimum average variable cost.

94) If the price is less than a perfectly competitive firm’s minimum average variable cost, the firm

A) makes an economic profit.

B) operates and incurs an economic loss equal to total fixed cost.

C) operates and incurs an economic loss equal to average variable cost.

D) shuts down and incurs an economic loss equal to total fixed cost.

E) shuts down and incurs an economic loss equal to average variable cost.

95) Which of the following is true if a firm shuts down?

i.The price is less than minimum average variable cost.

ii.The firm is able to avoid an economic loss.

iii.The firm incurs a loss equal to its total variable cost.

A) i only

B) i and ii

C) i and iii

D) iii only

E) ii only

96) If the market price is $50 for a unit of a good produced in a perfectly competitive market and the firm’s minimum average variable cost is $52, then to maximize its profit (or minimize its loss) the firm should

A) definitely produce the unit.

B) shut down.

C) not produce the unit but remain open.

D) not produce the unit. Whether the firm should shut down or remain open cannot be determined without more information.

E) produce the unit only if the price exceeds the average fixed cost.

97) Suppose a perfectly competitive firm’s minimum average variable cost is $3 when it produces 50. If the price is $2 and the firm’s marginal cost is $2, the firm should

A) continue to produce, but produce more than 50.

B) continue to produce 50.

C) continue to produce, but produce less than 50.

D) shut down.

E) continue to operate, but to determine the amount of production needs more information than is given.

98) Under what conditions would a perfectly competitive cotton farmer who is incurring an economic loss temporarily stay in business?

A) if the total revenue exceeds the total fixed cost

B) if the total revenue exceeds the total variable cost

C) if the total revenue is positive

D) if the total revenue is increasing

E) if the marginal revenue exceeds the price.

99) The largest loss a profit-maximizing perfectly competitive firm can incur in the short run equals its

A) average variable cost multiplied by output.

B) total fixed cost.

C) marginal cost multiplied by the number of units produced.

D) average total cost multiplied by the number of units produced.

E) total variable cost.

100) The rutabaga market is perfectly competitive and the price of a ton of rutabagas rises. As a result, Rudy, a rutabaga farmer, will

A) decrease his output of rutabagas.

B) not change his output of rutabagas because Rudy’s firm is a price taker.

C) increase his output of rutabagas.

D) at first decrease and then increase his output of rutabagas.

E) probably change his output of rutabagas, but more information is needed about the change in the marginal revenue of a ton of rutabagas.

101) A perfectly competitive firm’s short-run supply curve is

A) horizontal at the market price.

B) its total cost curve above the AVC.

C) its marginal cost curve below the marginal revenue curve.

D) its marginal cost curve above the AVC curve.

E) its marginal revenue curve below the ATC curve.