# If a perfectly competitive firms price is less than

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Chapter 14 / Exercise 14-6
Fundamentals of Financial Management
Brigham Expert Verified
4) If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost,the firmA) is earning a profit.B) should shut down.C) is incurring a loss.D) is breaking even.Answer:
CFigure 12-4
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Chapter 14 / Exercise 14-6
Fundamentals of Financial Management
Brigham Expert Verified
Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.6) Refer to Figure 12-4.If the market price is \$30 and if the firm is producing output, what is the amount of its total variable cost?
D7) Refer to Figure 12-4.What is the amount of its total fixed cost?
C8) Refer to Figure 12-4.If the market price is \$30 and the firm is producing output, what is the amount of the firm's profit or loss?
A9) Refer to Figure 12-4.If the market price is \$30, should the firm represented in the diagram continue to stay in business?A) No, it should shut down because it is making a loss.B) No, it should shut down because it cannot cover its variable cost.C) Yes, because it is covering part of its fixed cost. D) Yes, because it is making a profit.Answer:
C
Table 12-3QuantityTotal CostAverage TotalCostMarginalCost0\$10.00----------115.00\$15.00\$5.00217.508.752.50322.507.505.00430.007.507.50540.008.0010.00652.508.7512.50767.509.6415.00885.0010.6317.509105.0011.6720.00Arnie sells basketballs in a perfectly competitive market. Table 12-3 summarizes Arnie's output per day (Q), total cost (TC), average total cost (ATC) and marginal cost (MC). 28) Refer to Table 12-3. What price (P) will Arnie charge and how much profit will he earn if the market price of basketballs is \$12.50?
C29) Refer to Table 12-3. What will Arnie's output be and how much profit will he earn if the market price of basketballs is \$5.00?
B12.4 Deciding Whether to Produce or to Shut Down in the Short Run1) If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, the firm
B2) A perfectly competitive firm's supply curve is itsA) marginal cost curve.B) marginal cost curve above its minimum average total cost.C) marginal cost curve above its minimum average variable cost.D) marginal cost curve above its minimum average fixed cost.Answer:
CFigure 12-9
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
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