A firm sells 1000 units per week. It charges 70 per unit, the average variable costs are 25, and the average costs are 65 . In the short run, the firm should
a. Shut-down as the firm is making a loss of 15,000 per week
b. Shut-down as price is lower than average cost
c. Continue operating as the firm is covering all the variable costs and some of the fixed costs
d. Shut-down because it is cost effective to pay off the remaining fixed costs
QUESTION 2In a sequential game, if Irene decides to enter the market, what would be Mattie's best response?
a. Accommodate
b. Fight
c. Run away
d. Shut down
QUESTION 3In the short-run, a firm's decision to shut-down should not take into consideration
a. Avoidable costs
b. Variable costs
c. Fixed costs
d. Marginal costs
QUESTION 4In sequential games,
a. Players take turns and observe their rivals choices before they make their choices
b. Players take turns but don't observe their rivals choices before they make their choices
c. Players move at the same time
d. None of the above
QUESTION 5A firm's sunk costs are 100,000 and its marginal costs are 250 per unit. It produces 500,000 units and prices it at 400 per unit., How low can price go before the firm decides to shut down?
a. 150
b. 250
c. 250.20
d. 400
QUESTION 6Dremel Tools Dremel sells a high speed rotary tool appropriate for many workshop projects. They have developed hundreds of accessories and bits for their tools for many different applications. Why is the markup on the accessories higher than the markup on the rotary tools?