A shoe manufacturer is producing at a point where its marginal costs are 5 and its fixed costs are 5000 . At the current price of 10 it is producing 500 pairs. If the demand goes down, such that they can now only charge 8 per pair, should they continue production in the short run?
a. No because price has fallen
b. Yes because price is still higher than marginal costs
c. No because price is lower than average cost
d. Yes because price is higher than marginal costs
QUESTION 2If Bratty Brad decides not to hit Mousey Mike, what would Mousey Mike's best response be?
a. Tell
b. Not tell
c. Run
d. Hide
QUESTION 3A firm's fixed but avoidable costs are 100,000 and its variable costs are 250 per unit. It produces 50,000 units and prices it at 400 per unit. In the long-run, how low can price go before the firm decides to shut down?
a. 150
b. 252
c. 250.20
d. 400
QUESTION 4If Mousey Mike tattles, what would Bratty Brad's best response be
a. Hit
b. Not hit
c. Run
d. Hide
QUESTION 5In order to continue operating, in the long-run a firm must
a. Charge a price equal to its AVC
b. Charge a price equal to its AFC
c. Charge a price equal to its AC
d. None of the above
QUESTION 6If Bratty Brad decides to hit Mousey Mike, what would Mousey Mike's best response be
a. Tell
b. Not tell
c. Run
d. Hide
QUESTION 7A firm sets its price at 10.00 per unit. It has an average variable cost of 8.00 and an average fixed cost of 4.00 per unit. In the long run, this firm is
a. earning zero profits and hence should shut down.
b. unable to cover all of its fixed cost and hence should shut down.
c. incurring a profit.
d. incurring a loss per unit of 2.00, but since it can still cover its variable costs, should continue to operate.
QUESTION 8If Tom threatens to tell, what would Sarah's best response be?
a. Hit
b. Not hit
c. Run
d. Hide