![]() ![]() (D) Need more information to answer this question. (C) Continue to operate in the short-run. (B) Increase the price to $5 per hot dog. James’ cost for ingredients is $2.5 a hot dog, while the cost of his city permit to operate on the street averages $1.5 a hot dog. James owns a competitive hot dog stand in downtown Toronto. ![]() (E) elastic and equal to the marginal cost curve.Ħ. (D) perfectly inelastic and equal to the marginal cost curve. (C) perfectly elastic and equal to the marginal cost curve. (B) perfectly elastic and equal to the marginal revenue curve. (A) perfectly inelastic and equal to the marginal revenue curve. The demand curve facing an individual competitive firm is: Which of the following is not a basic assumption of a perfectly competitive market?ĥ. In a competitive market, an individual firm is a price taker, and it faces a demand that is perfectly elastic (i.e., horizontal).Ĥ. A firm in a perfectly competitive market will have a marginal revenue curve that is _. Since P = 20 > 10, Firm A will continue to operate and will produce 50 units of product.ģ. (E) Q* = 50 Firm A should continue to produce. (C) Q* = 50 Firm A is indifferent about shutting down or producing. (B) Q* = 20 Firm A should continue to produce. What is Firm A’s profit-maximizing output decision for the short-run? Its short-run total cost function is given as:įirm A’s product is sold at a market price of $20 a unit. Firm A operates in a perfectly competitive market. The market price of the combo meal is $20.Īssume that the local government decides to impose a per-unit tax of $2.50 ONLY on Zach’s restaurant. ![]() Zach owns a small, perfectly competitive, fast-food restaurant in downtown Toronto. Topic 6 Practice Questions (Credit: Fred Miller/ Flickr/CC BY 2.0)ġ. ![]()
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