Suppose a perfectly competitive firm can produce 20,000 bushels of corn a year at an output at which marginal cost equals marginal revenue. The market price of corn per bushel is $2.00. The firm's total costs per year are $50,000 and fixed costs per year
are $25,000. In the short run, this firm should
A) shut down.
B) continue producing until the price of corn increases.
C) produce 20,000 bushels of corn because, although they are losing money, they are losing less than if they shut down.
D) produce 40,000 bushels to try to increase economic profit.
Answer: C
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Which of the following is NOT an example of a way in which microeconomic analysis can help in designing environmental policy?
A) Determining the optimal level of vehicle fuel efficiency standards B) Designing laws to provide incentives for firms to implement clean technologies in new vehicles C) Lobbying consumers and firms to reduce consumption of energy D) Examining the tradeoffs between ecological benefits of environmental legislation and its impacts on consumers' standard of living
To incentivize a salaried manager at a company store to work harder, the management should
a. Offer the manager the franchise b. Offer the manager a raise c. Centralize all decision-making d. None of the above