10. In the figure above<?xml:namespace prefix = o ns = \"urn:schemas-microsoft-c

ID: 1176488 • Letter: 1

Question

10. In the figure above<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

a. the firm is suffering negative economic profit.

b. the firm is operating in a perfectly competitive industry.

c. the firm should shut down in the short run because it%u2019s price of $8 does

not cover its variable costs.

d. consumer surplus is equal to $75.

e. None of the above is true.

11. Given a perfectly competitive market structure, a firm's total fixed costs are $195,

average variable costs are $4, marginal revenue is $6, and the quantity demanded is

65. Assuming the firm is a profit maximizer, what is the firm%u2019s total profit?

a. $145

b. -$65

c. -$195

d. -$455

e. This firm will shut down because it is losing money.

10) e. None of the above is true.

Consumer Surplus = (21-15)*10*.5 = $30

Firm's profit = (15-9)*10 = 60

11) b. -$65

Total Cost = 195 + 4*65 = 455

Total Revenue = 6*65 = 390

Total Profit = 390-455 = -65

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