2.At the point at which P=MC, suppose that a perfectly competitive firm's MC = $100, its AVC = $80 and its AC = $110. This firm should

A.shut down immediately.

B.continue operating in the short run.

C.try to take advantage of economies of scale.

D.try to increase its advertising and promotion.

E.None

3.If the inverse demand curve a monopoly faces is p = 100 - 2Q, then profit maximization

A.is achieved when 25 units are produced.

B.is achieved by setting price equal to 25.

C.is achieved only by shutting down in the short run.

D.cannot be determined solely from the information provided.

E.None

4.You've been hired by an unprofitable firm to determine whether it should shut down its operation. The firm currently uses 70 workers to produce 300 units of output per day. The daily wage (per worker) is $100, and the price of the firm's output is $30. The cost of other variable inputs is $500 per day. Although you don't know the firm's fixed cost, you know that it is high enough that the firm's total costs exceed its total revenue. You know that the marginal cost of the last unit is $30. Should the firm continue to operate at a loss? Carefully explain your answer. (2Pts)

5.Assume your firm is producing in the short run and your revenue can not cover your fixed costs. So, should you shutdown your firm? Yes or No? Why? (1Pt)

6.If a firm sets marginal revenue equal to marginal cost it will make an economic profit. Is the statement true or false? Why?(1Pt)