Answered: If a firm is a price taker, then the…

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter11: Price-searcher Markets With High Entry Barriers

Section: Chapter Questions

Problem 14CQ

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(19)

If a firm is a price taker, then the demand curve for a single firm is

Select one:

a. perfectly inelastic.

b. perfectly elastic.

c. the same slope as market demand.

(20)

A profit-maximizing decision must be made about whether to keep a bed & breakfast operating. Until the place sells, the mortgage of $3000/month, a sunk cost, must be paid. If the bed & breakfast operates, costs rise by $4000 per month, but revenue will be only $6000 per month. Until the building can be sold,

Select one:

a. it is best to ignore sunk costs and keep the bed & breakfast operating.

b. It is best to shut down the bed and breakfast since it is taking a loss.

c. it is best to keep the bed & breakfast operating because it is profitable.

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