Table 71 Table 71 Shows the Short-Run Cost Data of a Perfectly Competitive

question 2

Multiple Choice

Table 7.1
$$\begin{array} { | c | c | c | } \hline \text { Quantity } & \begin{array} { c } \text { Total Cost } \\\text { (dollars) }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { (dollars) }\end{array} \\\hline 0 & \$ 1000 & \$ 0 \\\hline 100 & 1360 & 360 \\\hline 200 & 1560 & 560 \\\hline 300 & 1960 & 960 \\\hline 400 & 2760 & 1760 \\\hline 500 & 4000 & 3000 \\\hline 600 & 5800 & 4800 \\\hline\end{array}$$ Table 7.1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 7.1.Suppose the fixed cost of production rises by $500 and the price per unit is still $8.What happens to the firm's profit-maximising output level?

• A) It must fall.
• B) It must rise to offset the increased cost.
• C) It will remain the same.
• D) The firm will shut down.

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Definitions:

Time Variances

The difference between actual time taken to perform an activity and the standard time expected.

Standard Labor Hours

The predetermined amount of time expected to be required to complete a specific task or job.

Actual Costs

The true, total costs incurred for processes or products, including all direct and indirect expenses.

Direct Labor

The wages paid to workers who are directly involved in the production of goods or services.