A perfectly competitive firm that makes car batteries has a fixed cost of $10,000 per month. The market price at which it can sell its output is $100 per battery. The firm’s minimum AVC is $105 per battery. The firm is currently producing 500 batteries a month (the output level at which MR = MC). This firm is making a and should production. loss; shut down profit; increase loss; increase profit; shut down

Pear co.’s income statement for the year ended december 31, as prepared by pear’s controller, reported income before taxes of $125,000. the auditor questioned the following amounts that had been included in income before taxes: equity in earnings of cinn co. $ 40,000 dividends received from cinn 8,000 adjustments to profits of prior years for arithmetical errors in depreciation (35,000) pear owns 40% of cinn’s common stock, and no acquisition differentials are relevant. pear’s december 31 income statement should report income before taxes of