QUESTION 16 Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC= 20, AVC= 15, and the price per unit is 17. In this situation, a. Jose's restaurant is earning a positive economic profit. b. Jose's restaurant should shut down immediately. c. the market price will rise in the short run to increase profits. d. Jose's restaurant is making a loss but should continue to operate, because shutting down is more costly.

QUESTION 16 Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC= 20, AVC= 15, and the price per unit is 17. In this situation, a. Jose's restaurant is earning a positive economic profit. b. Jose's restaurant should shut down immediately. c. the market price will rise in the short run to increase profits. d. Jose's restaurant is making a loss but should continue to operate, because shutting down is more costly.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Firms In Competitive Markets

Section: Chapter Questions

Problem 4CQQ

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If Doug's Dry Cleaners operates in a perfectly competitive market, and its shutdown price is $12/shirt, what does this firms short run supply curve look like? Select one: a. starting from price at which Doug starts making some economic profit, the short run supply curve is his MC curve. O b. it is an upward sloping curve starting at origin C Doug supplies nothing up to $12/shirt; after that it is his MC curve d. Doug supplies nothing up to $12/shirt; after that it is his AVC curve e. None of the answers offered are accurate.
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Refer to the diagram to the right which shows cost and demand curves facing a profit - maximizing perfectly competitive firm. At price P3¹ the firm would O A. lose an amount less than fixed costs. OB. break even. OC. lose an amount more than fixed costs. D. lose an amount equal to its fixed costs. C P Price and cost U D 0 a ठ 1 C d MC e f Q3 Q4 Quantity ATC AVC g Q
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