Lessons Assessments Gradebook Email 2 #Tools - Question 3(Multiple Choice Worth 4 points) (03.06 MC) Price Q, Q, Quantity If the price that the business with the production costs above is able to charge for its product is at P, , what does the theory of the firm suggest they should do? Operate in the short run and exit the market in the long run. Shut down in the short run. Decrease production to lower costs Operate in the short run and stay in the market, enjoying economic profits O Operate in the short run and stay in the market, enjoying accounting profits Question 1 (Not Answered) v 0 ous Questionadebook Email 2 Tools My Cours O The variable costs of the business are covered but not all of its fixed costs. It is not producing where marginal cost equals marginal revenue. Question 5(Multiple Choice Worth 4 points) (03.06 MC) A profit-seeking firm is in a competitive market and experiences the following production figures: marginal cost equals marginal revenue at $4.50, marginal cost equals average total cost at $6, and marginal cost equals average variable cost at $4. Based on these figures, what should it do? O Operate in the short run and exit the market in the long run. O Shut down in the short run. O Decrease production to lower costs. O Operate in the short run and stay in the market, enjoying economic profits. O Operate in the short run and stay in the market, enjoying accounting profits. Question 1 (Not Answered) v 0 Ne vious Question O hulu N ENG hDecrease production to lower costs. O Operate in the short run and stay in the market, enjoying economic profits O Operate in the short run and stay in the market, enjoying accounting profits Question 4(Multiple Choice Worth 4 points) (03.06 LC) A business is taking on economic losses in the short run. Which of the following must be true if it continues to produce during this period? The business is making significant accounting profit. The business's accounting losses must be less than its economic profit The business knows it can lower its costs in the long run while maintaining production. The variable costs of the business are covered but not all of its fixed costs It is not producing where marginal cost equals marginal revenue Question 5(Multiple Choice Worth 4 points) (03.06 MC) A profit-seeking firm is in a competitive market and experiences the following production figures: marginal cost equals marginal revenue at $4.50,Lessons Assessments Gradebook Email 2 Tools The firm Narwhals R Us produces food for narwhals. The business is operating in a competitive industry and experiences the following: . marginal revenue = $7 . marginal cost = marginal revenue at $7 . marginal cost = average variable cost at $4 . marginal cost = average total cost at $6 (a) Draw an accurately labeled graph of this firm's production with MC, MR, AVC, and ATC all represented. Label the profit-maximizing quantity Opm. (b) Explain how to determine the profit-maximizing level of production. (c) If the average total cost (ATC) is $5 at the point that MC = AVC, what is the average fixed cost (AFC) at that point? (d) is the firm earning economic profit or incurring a loss? Explain. (e) On your graph from part (a), shade the area of the firm's profit or loss.What is Slothco's marginal cost for its 6th unit? What does it mean to say Slothco is a "price-taker?" ) Assume the market price is $4. What is Slothco's profit-maximizing or loss-minimizing level of output? explain. (d) Based on your answer to part (c), what is the value of Slothco's economic profit or loss? (e) Using two completely labeled side-by-side graphs, illustrate how the market sets the short-run demand for Slothco. (Base your graphs on the perfect competition model, not the prior data.) Label the market equilibrium price Pe and quantity Qe. Label the profit-maximizing quantity for Slothco Of. Assume that Slothco is earning normal profit. f) Illustrate the short-run effect of an increase in market demand on your graphs from part (e). Label the new market equilibrium price Pez and quantity Q-2. Label the new profit-maximizing quantity for Slothco Q-2. Shade completely the area of Slothco's economic profit or loss. (g) What would happen to this industry in the long run and to Slothco's economic profit or loss if it stays in the industry? Explain. h) In two side-by-side graphs, draw a new perfectly competitive market and individual firm experiencing short-run economic losses. Illustrate what will happen to the market in the long run and the impact on the firm's losses. Be sure to completely label your graphs. Download N hpQuestion 2(Multiple Choice Worth 4 points) (03.06 MC) P. Price P. Q, a, Quantity A business with the production costs above is operating in a competitive market with the price at P.. What is likely to happen in the long run? The firm will exit the market because the price is higher than its marginal cost The firm will lower its price to attract more consumers. Other firms will enter the market and lower the price The firm will see its marginal cost rise, forcing it to lower production. The firm will operate until its fixed costs are variable and then shut down.Operate in the short run and stay in the market, enjoying economic proms." O Operate in the short run and stay in the market, enjoying accounting profits Question 6(Multiple Choice Worth 4 points) (03.06 MC) If a firm is enjoying modest accounting profit but incurring significant economic losses, which of the following must be true? O The explicit costs of the business are greater than its total revenue O The firm's marginal revenue is greater than its marginal cost The business should increase production until marginal cost is greater than average total cost. O The business will shut down in the short run. O The business has another opportunity that could bring in much more revenue. You must check the box below prior to submitting your exam! Previous Question Question 1 (Not Answered) ~ |0 O hulu N hpThemes le udent/frame_toolbar.cgi?ehaims1*rhodemardy*sit=tFcOHNkirUHoo&option=hidemenu*5097*http://le E Lessons Assessments Gradebook Email 2 Tools . As always, make certain you label all axes and curves. Slothco is a firm in a perfectly competitive, constant-cost industry. Its total cost function is shown below: Units Total Cost 0 $5 $6 $10 w $15 $24 |$40 6 a) What is Slothco's marginal cost for its 6th unit? b) What does it mean to say Slothco is a "price-taker?" c) Assume the market price is $4. What is Slothco's profit-maximizing or loss-minimizing level of output? Explain. (d) Based on your answer to part (c), what is the value of Slothco's economic profit or loss? e) Using two completely labeled side-by-side graphs, illustrate how the market sets the short-run demand for Slothco. (Base your graphs on the perfect competition model, not the prior data.) Label the market equilibrium price P. and quantity Qs. Label the profit-maximizing quantity for Slothco Q. Assume that Slothco is earning normal profit. hp