Table: Decision to Enter Use the Table

question 184

Multiple Choice

Table: Decision to Enter $$\begin{array} { c c c } \hline \begin{array} { c } \text { Quantity } \\\text { (per day) }\end{array} & \begin{array} { c } \text { Marginal Revenue } \\\text { = Price }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Cost }\end{array} \\\hline 1 & \$ 750 & \$ 150 \\2 & \$ 750 & \$ 400 \\3 & \$ 750 & \$ 750 \\4 & \$ 750 & \$ 1,250 \\\hline\end{array}$$ Use the table. A firm is considering whether to enter an industry, with the conditions upon entry set forth in the table. Entering the industry would require the firm to pay $800 per day in fixed costs. This firm should ________ the industry because its profits would be ________ per day.

• A) not enter; -$1,350
• B) not enter; -$800
• C) enter; $700
• D) enter; $150

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Definitions:

Market Value

The market's current rate for buying or selling assets or services.

Interest Rate

The segment of a loan that incurs interest charges for the borrower, usually delineated as an annual percentage of the loan's remaining amount.

Present Discounted Value

The present value of a future amount of money or sequence of cash inflows, calculated using a designated rate of return.

Formula

A mathematical relationship or rule expressed in symbols.