Question

 

11. Given the table below, what is the profit maximizing output for the producer in the short‑run?

Output - Total revenue - Total cost

           1                    2.00                                     1.00

           2                    4.00                                     1.50

           3                    6.00                                     2.50

           4                    8.00                                     4.50

           5                   10.00                                    7.00

  

     a. 1 unit

     b. 2 units

     c. 4 units

     d. 5 units

12. A competitive firm can incur losses but continue to operate in the short‑run if it at least able to cover its:

     a. total costs

     b. fixed costs

     c. variable costs

     d. average total costs

13. Shannon the sorghum farmer is one of 5,000 perfectly competitive farmers raising sorghum in the United States. After attending classes at Krannert Business School, Shannon decides to charge $6.00/bushel for her    crop, rather than the $5.00/bushel she is currently   receiving. If she produces 500 bushels, what will her total revenue be:

     a. $3000

     b. $2500

     c. $2000

     d. $0

14. A firm should shut down in the short run if:

     a. price is greater than average variable costs

     b. average fixed costs are greater than marginal revenue

     c. price is less than average variable costs

     d. total costs are greater than fixed costs

15. Mr. T's Golden Necklace Company faces the following costs:

     

               Quantity             Total Cost

                  1                   $120

                  2                    230

                  3                    330

                  4                    460

                  5                    600

Assuming Mr. T is a price‑taker, and the market price is $130 per necklace, how many necklaces should Mr. T. produce?

     a. 2

     b. 3

     c. 4

     d. 5

Answer 1

Answer 11: Profit maximisation condition is that MR=MC. It means that in the short run the firm should maximised when Marginal revenue is exactly equal to Marginal cost.

Option C is correct.

Output	TR	MR	TC	MC
1	2	-	1	-
2	4	2	1 5	0.5
3	6	2	2.5	1
4	8	2	4.5	2
5	10	2	7	2 5

Answer 12:

Option C is correct. Firm is able to operate in the short run and if they able to cover the variable cost as in the short run the firm main purpose is to cover the variable cost and survive in the business. But they at least recovered the variable cost.

Answer 13 : Option D is correct. As when the farmer has been charged higher price than no one purchase there bushles and there revenue at that time is zero because they are operating in perfect competition market where the product is identical and large number of sellers.

Answer 14 : Option C is correct. A firm should shut down in the short run if they are not able to recover Variable cost. It means that when price is less than average variable cost.

Answer 15 : Table showing information:

Output	Total cost	Total revenue	profit= TR-TC
1	120	130	10
2	230	260	30
3	330	390	60
4	460	520	60
5	600	650	50

Profit is maximum both in 3 and 4 units.Option C is correct. The output production should be maximum .