I-Multiple choice

1.Nib chocolate produces 100,000 chocolate bars which sell for 4ETB a bar.If variable cost are 3ETB per bar, and it has 150,000 ETBfixed operating cost, in the shortrun, it should

a.Shut down as fixed cost are not being covered

b.Keep producing as profit are 50,000

c.Keeping producing as variable costare being met

d.Keep producingas total costs are being recovered

e.all

2.at the pointat which p ₌ MC, suppose that a perfectly competitive firms MC=100, its AC= 110 ,the firm should

a.Shut down immediately

b.Continue operating in the shortrun

c.Try to take advantage ofeconomic ofscale

d.Try to take its advertising and promotion

e.None

3.If cartel is un able to monitorits membersand punish those firms that violet the agreement , then

a.The member firms each act as price setters

b.The cartel will prosper in the long run

c.The market will become amonopoly

d.The cartel will fail

e.All

4.If the inversedemand cover amonopoly faceis p= 100-2Q, the profit maximization

a.Is achieved when 25 units are produced

b.Achieved by setting price equals to 25

c.Is achieved only by shutting downin the short run

d.Cannot be determinedsolely fromthe information provided

e.None

II-Short answer

1.You have been hired by an unprofitable firm to determine whether it should shut down its operation. The firm uses 70 workers currently to produce 300 units of out pout per day. The daily wage {per worker] is 100, and the price of the firms output is 30. The cost of other variable impute is 500 per day.Although you do not know the firms fixed cost, you know that it is high enough that the firm's total costs exceed its total revenue.You know that themarginal cost of the last unit is 30. Should the firm continue to operate at loss? Carefully explain your answer?

2.A monopolist hasdemand and costcurvesgiven by

QD=10,000-20P

TC=1000+10Q+0.05Q²

A.Find the monopolistic profit maximizing quantity and price

B.Find the monopolists profit

3.Assume your firm is producing in the short run and your revenue cannot cover your fixed cost. So should you shut down your firm? Yes or no? Why?

4.A firm sets marginal revenue equals cost will make an economic profit. Is the statement true or false? Why?