# Answer to Question #52931 in Microeconomics for Yana

Question #52931

1. A sandwich shop owner has the following information: P = MR = $ 4, ATC = $ 2, AVC

= $ 1, MC = 4, and Q = 500. From this, she can determine:

a. her profits are not being maximized.

b. she has earned economic profits of $ 1,000.

c. she has earned economic profits of $ 1,500.

d. she should sell fewer sandwiches.

2. If a firm shuts down in the short run, it will:

a. incur losses equal to its fixed costs.

b. produce at the output level where MC = MR.

c. reduce its losses to zero.

d. do this because P > AVC.

= $ 1, MC = 4, and Q = 500. From this, she can determine:

a. her profits are not being maximized.

b. she has earned economic profits of $ 1,000.

c. she has earned economic profits of $ 1,500.

d. she should sell fewer sandwiches.

2. If a firm shuts down in the short run, it will:

a. incur losses equal to its fixed costs.

b. produce at the output level where MC = MR.

c. reduce its losses to zero.

d. do this because P > AVC.

Expert's answer

1. A sandwich shop owner has the following information: P = MR = $ 4, ATC = $ 2, AVC = $ 1, MC = 4, and Q = 500. From this, she can determine:

As MR = MC and P>ATC

TP = (P - ATC)*Q = (4 - 2)*500 = $1000, so:

b. she has earned economic profits of $ 1,000.

2. If a firm shuts down in the short run, it will:

a. incur losses equal to its fixed costs.

As MR = MC and P>ATC

TP = (P - ATC)*Q = (4 - 2)*500 = $1000, so:

b. she has earned economic profits of $ 1,000.

2. If a firm shuts down in the short run, it will:

a. incur losses equal to its fixed costs.

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