Part I - Multiple Choice (4 pts total)

1.Nib Chocolet Company produces 100,000 chocolet bars which sell for 4 ETB a bar. If variable costs are 3ETB per bar, and it has 150,000ETB fixed operating costs, in the short run, it should

A.shut down as fixed costs are not being covered.

B.keep producing as profits are $50,000.

C.keep producing as variable costs are being met.

D.keep producing as total costs are being recovered.

E.All

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