Figure 12-17 the Graphs in Figure 12-17 Represent the Perfectly

question 12

Multiple Choice

Figure 12-17 The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry.
-Refer to Figure 12-17. Which of the following statements is true?

• A) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit. New firms will enter the market and shift the market supply curve to the left.
• B) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit, but it would earn a greater profit if it produced at the lowest point on the ATC curve.
• C) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit. New firms will enter the industry; as a result, the firm will be forced to exit the industry in the long run.
• D) The firm will produce 30 thousands pounds of apples in the short run and earn an economic profit. In the long run the firm will break even.

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Definitions:

Fixed Manufacturing Cost

Costs that do not change with the level of production, such as rent, salaries, and equipment depreciation.

Manufacturing Overhead

All manufacturing costs incurred during the production process that cannot be directly attributed to specific units produced, such as utilities, maintenance, and factory supplies.

Total Variable Cost

The total of variable costs involved in the production of goods or services, which change in proportion to the level of production or activity.

Total Fixed Cost

The sum of all costs required to produce any product or service, which remain unchanged regardless of the company's level of production or output.