ECON Ch.6 HW & Quiz
Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total revenue at its profit-maximizing level of output is ______.
$2,400
For a firm that produces bread, which of the following is likely to be a factor of production?
-Bakers -Flour -Ovens
For a firm that produces jeans, which of the following is likely to be a factor of production?
-Denim -Sewing machines -Workers
Which of the following are characteristics of perfectly competitive markets?
-Firms can easily enter and exit the market. -All firms sell the same standardized product.
Which of the following capture the conditions under which firms will shutdown?
-If price is less than average variable cost even when the firm produces at the level of output that minimizes average variable cost. -If the firm's revenue is less than the firm's variable cost at all levels of output.
Suppose the automobile manufacturers in an economy use a similar set of inputs to produce cars and SUVs. If the market price of SUVs increases, which of the following is likely to happen to the supply of cars?
It will decrease. Reason: Automobile manufacturers will shift their resources away from producing cars and towards producing SUVs, so the supply of cars will decrease.
Which of the following will cause an increase market supply?
A technological innovation that lowers the marginal cost of producing the good.
Which of the following is NOT a characteristic of a perfectly competitive market?
Each firm in the market sells a somewhat different variant of the good.
Which of the following is NOT true of a perfectly competitive firm?
It seeks to maximize revenue.
If a firm in a perfectly competitive market chooses the level of output such that price equals marginal cost, then the firm is ______.
maximizing its profits
Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 10 cents, then this firm
should produce 50 doughnuts.
Suppose Sarah owns a small company that makes wedding cakes. The accompanying table shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day. The marginal cost of the 4th wedding cake per day is ______.
$100
The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 75 pizzas, its average total cost is ______.
$12.67
Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The accompanying table describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. When the firm uses 9 employee-hours per day, its total variable cost each day is
$126.
Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The accompanying table describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. When the firm uses 9 employee-hours per day, its total cost each day is
$176.
Total cost divided by total output is:
average total cost
Given the figure on the right, if strawberries sell for $2 per pound, what will be total producer surplus in the market for strawberries each day?
$20,000 Reason: If price is $2, 20,000 pounds of strawberries will be purchased each day. Consumer surplus will be $20,000 (=2×20,000/2).
When the owners of a local brewery increase their output from 4 to 6 kegs of beer per day, their total cost increases from $310 to $360 per day. This implies that the marginal cost of producing an additional keg of beer is _____.
$25 Reason: Marginal cost is the change in total cost divided by the corresponding change in output. Thus, marginal cost is $25 (=$360−$310/6−4).
The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. Between 25 and 50 pizzas, the pizzeria's marginal cost is ______.
$4
The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 50 pizzas, its average variable cost is ______.
$5
If Marjory goes from painting 6 to 8 paintings each month, her total costs increase from $620 to $720 per month. This implies that the marginal cost of one additional painting is:
$50 Reason: Marginal cost is the change in total cost divided by the corresponding change in output. Thus, marginal cost is $720−$620/8−6 = $50.
The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 100 pizzas a day, its fixed cost is ______ and its total cost is ______.
$500; $1,350
John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table. What is John's opportunity cost of cleaning windows for an hour?
$7
Given the figure on the right, if strawberries sell for $4 per pound, what's the maximum amount producers would be willing to pay, in the aggregate, to participate in this market?
$80,000 per day Reason: If price is $4, producer surplus will be $80,000 (=4×40,000/2). This is the maximum amount producers would be willing to pay, in the aggregate, to participate in this market.
When Acme Dynamite produces 250 units of output, its variable cost is $2,000, and its fixed cost is $500. It sells each unit of output for $25.When Acme Dynamite produces 250 units of output, its average variable cost is ______ and its average total cost is ______.
$8; $10
Suppose that when the price of apples is 25 cents each, there are 10 farmers who each supply 600 apples per day, and 2 farmers who each supply 1,000 apples per day. Thus, when the price of apples is 25 cents, the market supply of apples is ______ per day.`
(10x600)+(2x1000)=8000
Suppose that when the price of tomatoes is $2 per pound, there are 5 farmers each willing to supply 10 pounds per day, and 3 farmers each willing to supply 20 pounds per day. Thus, when the price of tomatoes is $2 per pound, the market supply of tomatoes is _____ pounds per day.
(5 x 10) + (3 x 20)= $110
If recycling programs pay individuals and a reasonable amount for the collection of recycled raw materials, like aluminum, why do we have any litter at all?
-Some recyclable materials are often discarded in remote areas that make the cost of retrieval very high. -Total economic surplus is greatest when we recycle up to the point where MB = MC. -Each additional unit of recyclable materials incurs an additional cost. At some point this money could be spent elsewhere.
Which of the following are characteristics of perfectly competitive markets?
-The market has many sellers, each of which sells only a small fraction of the total quantity sold in the market. -Buyers are well informed about the prices different firms charge.
The marginal cost curve passes through the minimum of the:
-average total cost curve -average variable cost curve
Supply curves are upward sloping in part because as prices rise
-firms with a higher opportunity cost of producing the product will be willing to start supplying the product. -individual suppliers already in the market will be willing to turn to more costly production techniques to supply more of the product.
Refer to the accompanying table. It is clear that diminishing returns sets in after ______ workers per day.
1
When Cathy goes from hiring 10 to 11 workers in her bakery, her total output increases from 100 to 120 loaves of bread per day. If Cathy's production process exhibits diminishing marginal returns, then when she hires 12 workers, we know her total output will be less than ____ loaves of bread per day.
140 Loaves: 12th worker adds 20, total output < 140
The figure to the right shows the supply curve for The Apple of My Pie Baking Company. If there are 100 pie baking companies in the market (including The Apple of My Pie Baking Company), each with a supply curve like that of The Apple of My Pie Baking Company, then when the price of a pie is $17, what's the total market supply of pies each day?
1700
Refer to the accompanying table. To increase output from 33 to 66 units per day requires ______ extra employee(s); to increase output from 66 to 99 units per day requires ______ extra employee(s).
1; 2
John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table. How many hours a day should John spend cleaning windows?
2
Consider the table on the right, which shows the total cost of producing wedding cakes at Crumby Bakery. If the market price for a wedding cake is $250, and Crumby Bakery is a price-taker, how many wedding cakes should the bakery make each day?
3
Refer to the accompanying table. As the firm increases the number of employees each day from 1 to 2, output increases by
33 units.
Consider the table on the right, which shows the total cost of producing wedding cakes at Crumby Bakery. If the market price for a wedding cake is $350, and Crumby Bakery is a price-taker, how many wedding cakes should the bakery make each day?
4
If Mitch's Surf Shop has $30,000 in revenue each month and if the total cost of operating the shop is $26,000 each month, then the monthly profit for Mitch's Surf Shop is ______ dollars (enter a numeric value).
4,000
Given the figure on the right, if strawberries sell for $3 per pound, producer surplus ____ is dollars per day.
45,000
The picture on the right shows the cost curves for the West End Bakery. In this picture the bakery's profits equal ______ dollars per day (enter a number only).
50
The picture on the right shows the cost curves for the West End Bakery. In this picture the bakery's profits equal dollars per day
50
The picture on the right shows the cost curves for the West End Bakery. If the price of bread is $3 per loaf, then the profit maximizing level of output for the West End Bakery is _____.
50 loaves/day Reason: Yes! When the West End Bakery produces 50 loaves of bread per day, P=MC.
Refer to the accompanying table. The law of diminishing marginal returns becomes evident after ______ units of output are produced.
66
If Wahoo's Fish Tacos earns $75,000 revenue and incurs a total cost of $68,000 per month, then the monthly profit for Wahoo's Fish Tacos is ______ dollars. (Enter a numeric value only.)
7,000
The figure to the right shows the supply curve for The Apple of My Pie Baking Company. If there are 100 pie baking companies in the market (including The Apple of My Pie Baking Company), each with a supply curve like that of The Apple of My Pie Baking Company, then when the price of a pie is $10, what's the total market supply of pies each day?
900
Suppose Vera makes hand-knit scarves and sweaters that she sells on Etsy.com. If the price at which Vera can sell her scarves falls, what is likely to happen to Vera's supply of sweaters?
It will increase. Reason: Vera will shift her resources away from producing scarves and towards producing sweaters, so her supply of sweaters will increase.
John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table. Should John spend a third hour cleaning windows?
No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7.
If output can be varied continuously, then firms in a perfectly competitive market maximize their profits by choosing the level of output such that _____.
P=MC (Marginal Cost)
A price-taking, profit-maximizing firm will always produce a level of output where ______.
Price = MC
Which of the following is correct as it applies to pollution mitigation and recycling programs?
Reaching zero pollution increases MC above MB in most cases.
The price equals marginal cost rule for profit maximization is a specific example of which core principle?
The Cost-Benefit Principle
Which of the following is the most likely to be a fixed factor of production at a farm?
The land on which the farm is located
Which of the following is the most likely to be a variable factor of production at a university?
The number of librarians
When Warren hires 3 workers he can produce 20 cakes per day; when he hires 4 workers he can produce 30 cakes per day; and when he hires 5 workers he can produce 35 cakes per day. Is Warren's production process consistent the law of diminishing returns?
Yes Reason: When Warren goes from 3 to 4 workers, his output increases by 10 cakes per day, but when he goes from 4 to 5 workers, his output only increases by 5 cakes per day.
When Acme Dynamite produces 250 units of output, its variable cost is $2,000, and its fixed cost is $500. It sells each unit of output for $25. If the price of dynamite drops to $10, should Acme Dynamite continue to operate in the short run?
Yes, because price is greater than average variable cost.
As input prices increase, the cost of producing each additional unit of output increases, leading to
a decrease in supply. Reason: An increase in marginal cost corresponds to a decrease (leftward shift) in supply.
An input used in the production of a good or service is called ______.
a factor of production
A price taker is
a firm that has no influence over the price at which it sells its product.
Average variable costs is:
a firm's variable cost divided by total output
An input whose quantity cannot be altered in the short run is ______.
a fixed factor of production
The demand curve facing a firm in a perfectly competitive market is
a horizontal line at the equilibrium price.
A market in which no individual seller has significant influence over the market price of a product is known as _____.
a perfectly competitive market
The long run is best defined as
a period of time sufficiently long that all factors of production are variable
Technological innovations that decrease a firm's marginal cost lead to
an increase in supply. Reason: A reduction in marginal cost corresponds to a rightward shift in the supply curve (an increase in supply).
A factor of production is ______.
an input used in the production of a good or service
A variable factor of production is
an input whose quantity can be changed in the short run.
A fixed factor of production is ______.
an input whose quantity cannot be changed in the short run
An imperfectly competitive firm has
at least some control over price.
Refer to the accompanying figure. At quantities less than 50 doughnuts per day
average cost is declining because marginal cost is less than average cost.
If marginal cost equals average total cost, then:
average total cost is at its minimum Reason: Yes! The marginal cost curve intersects the average total cost curve at the minimum of the average total cost curve.
Variable cost divided by total output is called ______.
average variable cost
The accompanying graph shows the cost curves for Mei's mushroom gathering business, which is perfectly competitive. Mei's short run supply curve is
curve A above curve C.
Suppose a recent announcement by the United States Department of Agriculture leads Mr. Zuckerman, who grows sugar cane, to believe that the price of sugar cane will increase sharply next year. Mr. Zuckerman's current supply of sugar cane is likely to _______.
decrease Reason: Expectations of future price increases lead current supply to decrease because suppliers prefer to sell their product when prices are high.
Technological innovations in the production process tend to increase supply because they
decrease marginal cost. Reason: Technological innovations will reduce marginal cost (otherwise the firm would not adopt them). This corresponds to an increase in supply (a rightward shift).
Refer to the accompanying figure. Suppose a law is passed requiring restaurants to charge no more than $25 per meal. This law would:
decrease producer surplus.
Suppose a perfectly competitive firm is producing 77 units of output, and the marginal cost of the 77th unit is 11. If the firm can sell each unit of output for $8 and the firm's revenue is sufficient to cover its variable cost, the firm should
decrease production.
Marginal cost eventually increases because of _____.
diminishing returns Reason: Diminishing returns implies that it takes more of the variable input to produce each additional unit of output, which, in turn, implies that marginal cost is increasing.
When some of a firm's factors of production are fixed, the law of diminishing marginal returns states that increased production of the good eventually requires
ever-larger increases in the variable factor.
If a perfectly competitive firm can sell each unit of output for $9, and the marginal cost of the last unit produced is $8.50, then the
extra benefit of the last unit produced is greater than the extra cost.
A firm's profit-maximizing level of output will not change when the firm's ______ cost changes.
fixed
A firm's profit-maximizing level of output will not change when the firm's _______ cost changes.
fixed
The sum of all payments made to the firm's fixed factors of production is the firm's _____.
fixed cost
Suppose the owners of a local brewery carry property insurance that is paid for on an annual basis. In deciding how much beer to produce on any given day, the annual cost of the property insurance is considered a ____.
fixed cost Reason: Since the insurance policy cannot be altered on a daily basis, it is considered a fixed factor of production and so the cost of the insurance is a fixed cost.
Suppose an artist has a year-long lease on the studio where she works. When deciding how many paintings to make in a given month, the rent the artist pays for her studio is considered a _____. Multiple choice question.
fixed cost Reason: Since the lease cannot be altered on a monthly basis, the rent the artist pays is a fixed cost.
The picture on the right shows the cost curves for the West End Bakery. If the West End Bakery produces 60 loaves of bread per day, then the cost of producing the last loaf of bread was
greater than the revenue the firm gained from selling it. Reason: When the West End Bakery produces 60 loaves of bread, MC>MR.
Firms in perfectly competitive markets
have no control over price, and instead choose the level of output to maximize profit.
A price-taker faces a demand curve that is
horizontal at the market price
In perfectly competitive markets, firms choose
how much to produce but not the price of their output
A(n) _____ has at least some control over price.
imperfectly competitive firm
For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. As the market price of this good increases, the quantity produced by this seller will ______.
increase
The law of diminishing returns explains why marginal costs eventually _____.
increase
If the marginal cost of producing an additional unit of a good is less than price of that good, then the firm should
increase production.
If a firm's total revenue is greater than its total cost, then the firm _____.
is profitable
In a perfectly competitive market, the supply curve for a firm
is the portion of the marginal cost curve that lies above the average variable cost curve.
A profit-maximizing firm will only produce a positive amount of output if
its total revenue is greater than or equal to its variable cost.
Suppose Elsa owns an ice cream shop. If she expects the price of ice cream to fall next month, then this should ______.
lead her current supply of ice cream to increase Reason: Expectations of future price decreases lead current supply to increase because suppliers prefer to sell their product when prices are high.
The picture on the right shows the cost curves for the West End Bakery. If the West End Bakery produces more than 50 loaves of bread per day, then the amount of revenue the bakery generates from selling each additional loaf is:
less than the marginal cost producing each loaf Reason: When the bakery produces more than 50 loaves a day, price is less than marginal cost.
The picture on the right shows the cost curves for the West End Bakery. If the West End Bakery produces 30 loaves of bread per day, then the cost of producing the last loaf of bread was
less than the revenue the firm gained from selling it. Reason: When the West End Bakery produces 30 loaves of bread, MC<MR.
The period of time of sufficient length that all of the firm's factors of production are variable is known as the _____.
long run
Suppose a professional artist decides to paint one additional painting, the resulting increase in her total cost is the _____ of producing an additional painting.
marginal cost Reason: Marginal cost is the change in total cost divided by the change in total output. In this case, the change in total output is 1, so marginal cost is simply the change in total cost.
Suppose the owners of a local brewery decide to produce one additional keg of beer, the resulting increase in their total cost is the _____ of producing an additional keg.
marginal cost Reason: Marginal cost is the change in total cost divided by the change in total output. In this case, the change in total output is 1, so marginal cost is simply the change in total cost.
At each point along a market supply curve, price measures each seller's _____.
marginal cost of production
In general, when the price of a variable factor of production increases
marginal cost rises.
If a production process exhibits diminishing returns, then as output rises
marginal cost will eventually increase.
The accompanying table describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. If the price of a telephone increases from $5 to $10 an hour and nothing else changes, then
marginal cost would not change.
When plotting marginal and average cost curves, the ______ cost curve always crosses the ______ cost curve at its ______.
marginal; average total; minimum
A perfectly competitive market is a market in which
no individual seller has a significant influence over the market price of a product.
Suppose the Sandy makes bracelets that she sells on Etsy.com. If her fixed cost increases, then her profit maximizing number of bracelets will _____.
not change Reason: Changes in a firm's fixed costs of production do not affect the profit maximizing level of output since firms have to pay their fixed costs regardless of how much they produce.
If the marginal cost of producing the 500th unit of a good is greater than price of that good, then the firm should
not produce the 500th unit.
The accompanying graph shows the cost curves for Mei's mushroom gathering business, which is perfectly competitive. The curve labeled A is upward sloping because
of diminishing returns to Mei's variable factors of production.
A profit-maximizing perfectly competitive firm must decide
only how much to produce, taking price as fixed.
Firms in perfectly competitive markets face demand curves that are _____.
perfectly elastic
At each point along a market supply curve, _______ (one word) measures each seller's marginal cost of production.
price
Producer surplus is the amount by which:
price exceeds the seller's reservation price
If a firm is profitable, then at its profit maximizing level of output:
price is greater than average total cost (P>ATC).
A firm cannot be profitable unless:
price is greater than average total cost for some level of output
A firm that has no influence over the price at which it sells its product is a ______.
price taker
Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $15, then this firm should
produce 60 units of output.
The amount by which price exceeds the seller's reservation price is _____.
producer surplus
The difference between the total revenue of a firm and all costs (explicit and implicit) incurred by the firm is called _____.
profit
Suppose Vivek owns a small company that makes kites. The market for kites is perfectly competitive, and kites sell for $25 each. Vivek's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table. If Vivek's fixed cost rises, then in the short run, his
profit-maximizing level of output will not change.
Total revenue minus both explicit and implicit costs defines a firm's
profit.
Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The accompanying table describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. When the firm uses 23 employee-hours per day, it earns a daily ______ of ______.
profit; $28
An increase in consumers' demand for espresso will lead to an increase in ______, while an increase in the number of firms producing espresso will lead to a(n) ______.
quantity supplied; increase in supply
As the number of suppliers in the market increases, the market supply curve will shift to the _____.
right
If input prices decrease, supply will shift _____.
rightward Reason: A decrease in marginal cost corresponds to a increase (rightward shift) in supply.
As prices _____, firms with a higher opportunity cost of producing a product will be willing to start supplying the product.
rise
Supply will increase as the number of _____.
sellers in the market increases Reason: An increase in the number of buyers in the market will lead to an increase in supply.
The period of time sufficiently short that at least some of the firm's factors of production are fixed is known as the _____.
short run
Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it is clear that this firm
should not shut down if its total variable cost is less than $750.
The figure depicts the cost curves for the West End Bakery. If the West End Bakery produces 60 loaves of bread per day, then the firm:
should produce less because price is less than marginal cost. Reason: Whenever P < MC, the firm should reduce output.
The figure depicts the cost curves for the West End Bakery. If the West End Bakery produces 30 loaves of bread per day, then the firm:
should produce more because price is greater than marginal cost. Reason: Whenever P > MC, the firm should expand output.
The picture on the right shows the cost curves for the West End Bakery. If the West End Bakery produces 40 loaves of bread per day, then the firm
should produce more because price is greater than marginal cost. Reason: Whenever P>MC, the firm should expand output. Correct Answer should produce more because price is greater than marginal cost. Need help? Review these concept resources.
Suppose that when a firm produces the level of output at which price equals marginal cost, the firm's total revenue is less than its variable cost. In this case, the firm should
shut down.
Suppose that when a perfectly competitive firm produces 1,000 units of output, its total variable cost is $1,900. If the marginal cost of producing the 1,000th unit is $1.70, and if the market price of each unit of output is $1.70, then the firm should
shut down.
In a perfectly competitive market, the portion of the marginal cost curve that lies above the average variable cost curve is the firm's:
supply curve
The picture on the right shows the cost curves for the West End Bakery. The light blue shaded area represents
the bakery's profit of $50 per day.
In the short run, a profit-maximizing firm will not produce anything if Multiple choice question.
the firm's revenue is less than its variable cost at all levels of production.
The property that when some factors of production are fixed, increased production of a good eventually requires ever-larger increases in the variable factor is known as _____.
the law of diminishing returns
Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, then assuming this firm can earn enough revenue to cover its variable cost, it should produce
the quantity of doughnuts at which marginal cost equals the market price.
A firm's fixed cost is the sum of all payments made
to the firm's fixed factors of production.
Fixed cost + variable cost ________ = cost
total
The sum of all the payments made to the firm's fixed and variable factors of production is the firm's ______ cost.
total
A firm is profitable if its total revenue exceeds its _____.
total cost
Average total cost is:
total cost divided by total output
Profit equals _____.
total revenue minus total cost
A _____ factor of production is an input whose quantity can be altered in the short run.
variable
The sum of all payments made to the firm's variable factors of production is the firm's _____.
variable cost
Suppose an artist can easily change the number of hours she spends working each month. In deciding how many paintings to paint each month, the opportunity cost of the artist's time is considered a _____.
variable cost Reason: Since the amount of time the artist spends working each month can be easily changed, it's considered a variable input, and the opportunity cost of the artist's time is a variable cost.
Suppose the owners of a local brewery can easily change the number of workers they hire each day to help brew beer. In deciding how much beer to produce each day, the daily cost of hiring their workers is a _____.
variable cost Reason: Since the quantity of workers hired can be easily changed each day, they are considered a variable input, and the cost of hiring them is a variable cost.
Even when a firm produces the level of output at which price equals marginal cost, it should shut down if its total revenue is less than its
variable cost.
A firm's _______ cost is the sum of all payments the firm makes to inputs whose quantities can be altered in the short run.
variable or total variable
The accompanying graph shows the cost curves for Mei's mushroom gathering business, which is perfectly competitive. If mushrooms sell for $10 per bushel, and Mei chooses the profit-maximizing quantity, she will gather
zero bushels.