Question

7. Which of the following statements is (are) correct?

(x) A firm has a fixed cost of $16,000 in its first year of operation. When the firm produces 4,000 units of output, its total costs are $65,000. The marginal cost of producing 200 more units beyond 4,000 units is $28 per unit. Therefore, the total cost of producing 4,200 units is $70,600

(y) A firm has a fixed cost of $12,800 in its first year of operation. If the firm produces 400 units of output,

its average total cost is $110. The marginal cost of producing the 401st unit of output is $150 and the marginal cost of producing the 402nd unit is $165. Therefore, the variable cost of producing 402 units is more than $31,525.

(z) A firm has a fixed cost of $10,000 in its first year of operation. When the firm produces 3,000 units of output, its total costs are $45,000. When it produces 3,050 units of output, its total costs are $46,600.

If the marginal cost of each of the 50 additional units of output is the same then the marginal cost of producing the 3,015th unit of output is $32.

A. (x), (y) and (z)

B. (x) and (y) only

C. (x) and (z) only

D. (y) and (z) only

E. (x) only

9. At the current level of output, a profit-maximizing firm in a competitive market earns average revenue of $40, has an

average total cost of $43 and an average variable cost of $36.

If the firm's marginal cost curve is equal to its average total cost curve at an output level of 25,000 units, how much loss does the

firm experience at its current level of output?

A. exactly $75,000

B. more than $75,000

C. less than $75,000

D. None of the above

10. Which of the following statements is (are) correct?

(x) A profit maximizing firm in a competitive market produces corn. Suppose the market price for corn is $4.00 per bushel. At the profit maximizing (loss minimizing) quantity of 50,000 bushels, the ATC is equal to $5.00 and the AFC is equal to $1.50. Given these conditions the firm will experience losses of $50,000 since price is less than average total cost but greater than average variable cost.

(y) A profit maximizing firm in a competitive market produces wooden chairs. The firm, which is a price-taker, faces a price of $50 for its product. Its average total cost is $57 and its average fixed cost is $9 at the quantity where marginal cost equals marginal revenue. In the short run, the firm will shut down and incur the total loss of its fixed costs.

(z) At the current level of output, a profit-maximizing firm in a competitive market earns average revenue of $35 and has an average total cost of $32. If the firm's marginal cost curve is equal to its average total cost curve at an output level of 50,000 units, then the firm would earn a profit of $150,000 at its current level of output.

A. (x), (y) and (z)

B. (x) and (y) only

C. (x) and (z) only

D. (y) and (z) only

E. (x) only

Answer 1

Q7) option D) Y,Z are true

Q9) option C

Q-10) option E) X only