A firm in a competitive market has the following cost structure: Output Total Co

Question

A firm in a competitive market has the following cost structure:

Output Total Cost
0 $15
1 $20
2 $24
3 $30
4 $48
5 $80

1.) This firm will shut down
a. if price falls below $10.00 and exit if it falls below $5.00.
b. if price falls below $12.00 and exit if it falls below $8.25.
c. if price falls below $5.00 and exit if it falls below $10.00
d. if price falls below $8.25 and exit if it falls below $12.00

2.) If the market price is $8.50, this firm will
a. produce two units in the short run and exit in the long run.
b. produce three units in the short run and exit in the long run.
c. produce four units in the short run and exit in the long run.
d. produce zero units in the short run and exit in the long run.

Explanation / Answer

b. if price falls below $12.00 and exit if it falls below $8.25.

d. produce zero units in the short run and exit in the long run.

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