Suppose a Competitive Firm's Total Revenue Is $1,000,000 Where MR

question 100

Multiple Choice

Suppose a competitive firm's total revenue is $1,000,000 where MR = MC,its explicit variable costs are $900,000,its fixed costs are $90,000 of which $60,000 are sunk in the short run.If its implicit opportunity costs are $50,000,the firm should

• A) produce because its economic profit is positive.
• B) produce because its economic profit is zero.
• C) produce even though its economic profit is negative.
• D) shut down.

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Definitions:

Steak

A high-quality cut of meat taken from the hindquarters of an animal, typically beef, prepared by grilling, frying, or broiling.

Elastic Demand

A situation where the demand for a product changes significantly in response to a change in price.

Short Run

A period in which at least one input is fixed and cannot be changed by the firm.

Substitutes

Products or services that can replace each other, where an increase in the price of one leads to an increase in demand for the other.