# HELP - Costs questions?

I need help with this doing some review for a test and am having a hard time with these questions.

QUESTION 1

A firm in a perfectly competitive industry knows the following about its costs and revenue. The firm would like to maximize profit and has hired a consultant for advice. What should the firm do?

1. Firm is profit maximizing/loss minimizing

2. Firm should reduce quantity of output

3. Firm should increase quantity of output

4. Firm should shut down operations

5. The given number set is inconsistent

Price = ?

Q=?

Total Revenue= 7000

Total Cost=?

Total Fixed Cost=4000

Total Variable Cost=?

Average Total Cost= 8000

Average Variable Cost=5

Marginal Cost=8

QUESTION 2

A firm in a perfectly competitive industry knows the following about its costs and revenue. The firm would like to maximize profit and has hired a consultant for advice. What should the firm do?

1. Firm is profit maximizing/loss minimizing

2. Firm should reduce quantity of output

3. Firm should increase quantity of output

4. Firm should shut down operations

5. The given number set is inconsistent

Price = ?

Q=?

Total Revenue= 7000

Total Cost=?

Total Fixed Cost=2000

Total Variable Cost=?

Average Total Cost= 7

Average Variable Cost=3

Marginal Cost=4

Please show steps, thank you very much for your help! I really appreciate it.

Relevance
• Anonymous
8 years ago

1. P=14,000,Q=0.5

AC=AFC+AVC, 8,000=7,995+5

Q=4,000/7,995=0.5

TVC=2.5

1. not maximizing

2. increase

3. increase

4 not shut down

5. consistent.

2.AFC=7-3=4

Q=2000/4=500

TC=500x7=3,500

P=7000/500=14

TFC=2,000

TC=500x7=3,500

TVC=3500-2000=1500.

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