Question

12.The table below shows cost data for a firm operating in a perfectly competitive market:

Price ($ per unit)	Quantity (units)	Total cost ($)
50.00	0	10.00
50.00	1	20.00
50.00	2	27.50
50.00	3	77.50
50.00	4	147.50
50.00	5	250.00

What is the firm’s total revenue when four units are produced?

		$160
		$50
		$200
		$40

14.If a perfectly competitive firm is earning positive profits, then

		its average total cost must be higher than the market price.
		its total revenue must be higher than its total cost.
		its avearge total cost must be higher than its average revenue.
		its price must be greater than its marginal revenue.

15.In the short run, the fixed costs of a firm

		must be paid regardless of level of output.
		should be strongly considered in deciding whether to shut down production.
		are zero when quantity produced is zero.
		must be higher than variable costs for the firm.

16.In the short run, the fixed costs of a firm

		can sometimes be avoided in the short run.
		are irrelevant in deciding whether to shut down production.
		are equal to zero when quantity produced is zero.
		are all the costs it incurs when it produces some positive quantity

Answer 1

12.Ans: $200

Explanation:

Revenue = Price * Quantity

The firm’s total revenue when four units are produced = $50 * 4 = $200

14.Ans: its total revenue must be higher than its total cost.

Explanation:

When TR > TC , then there will be profit .

When TR < TC , then there will be loss .

15.Ans: must be paid regardless of level of output.

Explanation:

Fixed costs are available even at zero level of output and remain constant in the subsequent level of production.

16.Ans: are irrelevant in deciding whether to shut down production.

Explanation:

In the short run , the shut down point occurs where price is less than average variable cost (P < AVC).