. Consider a profit-maximizing, perfectly-competitive firm in the short run. Carefully define what we mean by the short run. a. b. Draw a diagram for this firm using the more realistic or complicated case (where the law of diminishing returns does not begin immediately) consisting of an average variable cost curve (AVC), an average total cost curve (ATC), and a marginal cost curve (MC). C. In this diagram, draw in a price (P) or marginal revenue (MR) line for which the firm is earning positive economic profits. Carefully label the profit rectangle. In a new diagram, draw in a P/MR line for which the firm is earning negative economic profits but positive profits on operation. Carefully label the profits on operation rectangle. d. e. For the diagram in 3d, please carefully explain why the firm might continue to produce despite the negative profits. This question concerns the absolute advantage model. Note: not comparative advantage. a. Draw supply and demand diagrams for two countries, France (F) and the Bangladesh (B) with France having an absolute advantage in the good automobiles in autarky. b. Referring to the autarky prices (P", PB), please define absolute advantage in the context of your diagram. c. Next use your diagram to show the movement from autarky to a trading equilibrium. Label imports and exports in the diagram. d. Use the diagram to carefully explain the gains from trade.
. Consider a profit-maximizing, perfectly-competitive firm in the short run. Carefully define what we mean by the short run. a. b. Draw a diagram for this firm using the more realistic or complicated case (where the law of diminishing returns does not begin immediately) consisting of an average variable cost curve (AVC), an average total cost curve (ATC), and a marginal cost curve (MC). C. In this diagram, draw in a price (P) or marginal revenue (MR) line for which the firm is earning positive economic profits. Carefully label the profit rectangle. In a new diagram, draw in a P/MR line for which the firm is earning negative economic profits but positive profits on operation. Carefully label the profits on operation rectangle. d. e. For the diagram in 3d, please carefully explain why the firm might continue to produce despite the negative profits. This question concerns the absolute advantage model. Note: not comparative advantage. a. Draw supply and demand diagrams for two countries, France (F) and the Bangladesh (B) with France having an absolute advantage in the good automobiles in autarky. b. Referring to the autarky prices (P", PB), please define absolute advantage in the context of your diagram. c. Next use your diagram to show the movement from autarky to a trading equilibrium. Label imports and exports in the diagram. d. Use the diagram to carefully explain the gains from trade.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:. Consider a profit-maximizing, perfectly-competitive firm in the short run.
Carefully define what we mean by the short run.
a.
b. Draw a diagram for this firm using the more realistic or complicated case (where
the law of diminishing returns does not begin immediately) consisting of an
average variable cost curve (AVC), an average total cost curve (ATC), and a
marginal cost curve (MC).
C. In this diagram, draw in a price (P) or marginal revenue (MR) line for which the
firm is earning positive economic profits. Carefully label the profit rectangle.
In a new diagram, draw in a P/MR line for which the firm is earning negative
economic profits but positive profits on operation. Carefully label the profits on
operation rectangle.
d.
e. For the diagram in 3d, please carefully explain why the firm might continue to
produce despite the negative profits.
This question concerns the absolute advantage model. Note: not comparative advantage.
a. Draw supply and demand diagrams for two countries, France (F) and the
Bangladesh (B) with France having an absolute advantage in the good
automobiles in autarky.
b. Referring to the autarky prices (P", PB), please define absolute advantage in the
context of your diagram.
c. Next use your diagram to show the movement from autarky to a trading
equilibrium. Label imports and exports in the diagram.
d. Use the diagram to carefully explain the gains from trade.
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