The Owner of Tie-Dyed T-Shirts, a Perfectly Competitive Firm, Has

question 255

Multiple Choice

The owner of Tie-Dyed T-shirts, a perfectly competitive firm, has hired you to give him some economic advice. He has told you that the market price for his shirts is $20 and that he is currently producing 200 shirts at an AVC of $15 and an ATC of $25. What would you recommend to him?

• A) To continue producing in the short run, as his loss from production is less than his fixed costs, but to exit the industry in the long run if there are no changes in economic conditions.
• B) To shut down in the short run, as he is incurring a loss, and to leave the industry in the long run, if there are no changes in economic conditions.
• C) To continue to produce in the short run, even though he is earning a loss, and to expand in the future with the hope of increasing market share and total revenue.
• D) You tell him you cannot make any recommendations until you know what his fixed costs are.

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Definitions:

Monozygotic Twins

Twins that develop from a single fertilized egg, sharing nearly 100% of their genetic material.

Dizygotic Twins

Also known as fraternal twins, these are siblings born during the same pregnancy who have developed from two separate eggs fertilized by two different sperm.

Biological Parents

The parent(s) who contribute their genes to their offspring through reproduction.

Chromosomes

Structures within cells that contain DNA and carry genetic information necessary for cell growth, division, and function.