Question : 21) In the short run, a firm that operating at : 1387800

21) In the short run, a firm that is operating at a loss has two options. These options are

A) to reduce output or reduce its variable costs.

B) to go out of business or declare bankruptcy.

C) to shut down temporarily or continue to produce.

D) to adopt new technology or change the size of its physical plant.

22) If a firm shuts down, it

A) will suffer a loss equal to its fixed costs.

B) will produce nothing but must pay its variable costs.

C) will produce nothing but must pay its fixed and variable costs.

D) will earn enough revenue to cover its variable costs but not all of its fixed costs.

23) How are sunk costs and fixed costs related?

A) They are not related in any way.

B) Sunk costs cannot be recovered and fixed costs can be avoided by shutting down.

C) In the short run they are equal to each other. 

D) In the long run they are equal to each other.

24) If a firm shuts down in the short run, it will

A) break even.

B) declare bankruptcy.

C) suffer a loss equal to its variable costs.

D) suffer a loss equal to its fixed costs.

25) Ben’s Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if

A) his Shoppe’s total revenue exceeds his fixed cost.

B) his Shoppe’s total revenue exceeds his variable cost.

C) his Shoppe’s total revenue exceeds his implicit costs.

D) his Shoppe’s total revenue exceeds his capital costs.

26) Ted’s Pancake Kitchen suffers a short-run loss. When should Ted decide to shut down rather than continue to produce?

A) if his Kitchen’s revenue is less than its variable costs

B) if his Kitchen’s revenue is less than its fixed costs

C) if his Kitchen’s revenue is less than its explicit costs

D) if his Kitchen’s revenue is less than its total costs

27) Marty’s Bird House suffers a short-run loss. Marty can reduce his loss below the amount of his total fixed costs by continuing to produce if his revenue

A) exceeds his implicit costs.

B) exceeds his nonmonetary opportunity costs.

C) exceeds his variable costs.

D) exceeds his marginal costs.

28) In analyzing the decision to shut down in the short run we assume that the firm’s fixed costs are

A) implicit costs.

B) capital costs.

C) nonmonetary opportunity costs.

D) sunk costs.

29) Molly Sharp is producing a documentary about the plight of the six-toed ferrets of Sri Lanka. Molly has spent $125,000 of her own money on this project and the documentary is now complete. Molly just found out that no studio is willing to release her documentary and she must now shop it to cable television networks, where she knows she will not be able to recoup her investment. Which of the following statements regarding Molly Sharp’s documentary is true?

A) She should not try to have her documentary aired on television because she cannot recoup her $125,000 investment.

B) Since the $125,000 is a sunk cost, she should still try to have her documentary aired on television even though she will not see a profit.

C) The $125,000 is a variable cost, so will not be incurred if she chooses not to have her documentary aired.

D) The $125,000 investment is an economic cost, and she will still make an accounting profit even if the television network willing to air her documentary pays her less than $125,000.

30) Which of the following is not an option for a perfectly competitive firm that suffers short-run losses?

A) shutting down

B) reducing production

C) reducing the use of variable factors

D) raising price