2. In the graph below, name the curves A, B, C and D Quantity (units per day) 3. In the graph above, indicate the following a. Price at which a firm makes a positive profit b. Price at which the firm makes zero economic profit c. The exact shutdown point d. The price at which the firm must exit (leave the market) e. The price at which the firm makes a loss but stays in the market Costs per unit (dollars per unit)

2. In the graph below, name the curves A, B, C and D Quantity (units per day) 3. In the graph above, indicate the following a. Price at which a firm makes a positive profit b. Price at which the firm makes zero economic profit c. The exact shutdown point d. The price at which the firm must exit (leave the market) e. The price at which the firm makes a loss but stays in the market Costs per unit (dollars per unit)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. The components of marginal revenue Dmitri's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Dmitri produced four fire engines, but he has decided to increase production to five fire engines. The following graph shows the demand curve Dmitri faces. As you can see, to sell the additional engine, Dmitri must lower his price from $105,000 to $90,000 per fire engine. Note that although Dmitri gains revenue from the additional engine he sells, he also loses revenue from the initial four engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial four engines by selling at $90,000 rather than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $90,000. 150 135 Revenue Lo 120 Demand 105 80 Revenue Gained PRICE (Thousands of dollars per fe engine 228…
Price 10 Quantity a. This firm will produce units of output at a price of b. The firm will earn a profit or loss (circle one) of c. What is the firm's short-run shut down price? d. What is the long-run market equilibrium price and quantity? e. What is the firm's profit or loss in the long run f. What kind of firm is this?
5. Profit maximization and shutting down in the short run The following graph plots daily cost curves for a firm operating in the competitive market for rompers. PRICE (Dollars per romper) 50 45 40 35 30 25 20 15 10 5 0 0 2 MC 27.50 45.00 4 ATC AVC 6 8 10 12 14 QUANTITY (Thousands of rompers) 16 Price Quantity (Dollars per romper) (Rompers) 12.50 18 20 Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) ? Total Revenue (Dollars) Fixed Cost Variable Cost (Dollars) (Dollars) 135,000 135,000 135,000 Profit (Dollars) If the firm shuts down, it must incur its fixed costs (FC)…
Figure 16-12 Price 100 90 + 80 70 + MC 'ATC 58 60 50 + 40 36 30 + 20 + 10 + MR + 4 12 16 20,24 28 32 Buaxtity 8 d) Is this market more efficient or less efficient compared to perfect competition. Give two reasons for your answer.
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4. Study Questions and Problems #4 The market equilibrium price for wheat is $4 per bushel. On the following graph, use the green line (triangle symbol) to plot the marginal revenue curve for a typical wheat farmer. Use the orange line (square symbol) to plot the total revenue curve for this farmer. TOTAL REVENUE & MARGINAL REVENUE (Dollars per bushel) 10 9 9 1 2 3 4 6 6 7 8 9 10 QUANTITY (Bushels) Marginal Revenue Total Revenue ? True or False: Marginal revenue is the change in total revenue per bushel. In this case, $4 is the marginal revenue that remains constant and equal to price. True False
5. Restaurants offer related but differentiated products to their consumers. In the long run, new restaurants enter the market and imitate the cuisine and atmosphere of successful competitors. How would you expect a restaurant to set its prices in the long run? Describe the relationship between price and average total cost. Does a restaurant earn economic profits?
Perfect Competition MC - Marginal Cost MR - Marginal Revenue ATC - Average Total Cost Refer to the figure above. If this firm is producing the profit-maximizing quantity and selling it at the profit-maximizing price, the firm's total revenue will be: $240 $90 $60 $180
7. Use the graphs below to answer the following questions. Market a. Is the firm making an economic profit or loss? b. Will firms enter or exit this market? Markat c. Sketch on the graph and explain what happens to bring this market to long run equilibrium d. is the firm making an economic profit or loss? e. Will firms enter or exit this market? MC ATC Firm MR MC ATC age 1 of 3 -MR f. Sketch on the graph and explain what happens to bring this market to long run equilibrium.
1. Competitive market, Practice Question Wheat farmer Joe has the cost function of C(q) = 160,000 + 100q+q²__ The market for wheat is competitive and there are many farmers like this, with the same cost function. The demand function is Q = 15000 - 10p. (a) In the short run, below which price should Joe shut down? (b) In the short run, there are 19 farmers like Joe (so 20 farmers in total). How much should Joe produce? What will the price be? (c) What is the price below which Joe would shut down in the long run? (d) How many farmers will operate in the long run? (e) What is the market elasticity of demand at long-run equilibrium point?
1. Draw the cost curves for a typical firm. Explain how a competitive firm chooses the level of output that maximizes profit. At that level of output, show on your graph the firm’s total revenue and total cost.
3. The components of marginal revenue Lorenzo's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Lorenzo produced five fire engines, but he is considering increasing production to six fire engines. The following graph shows the demand curve Lorenzo faces. As you can see, to sell the additional engine, Lorenzo must lower his price from $105,000 to $90,000 per fire engine. Note that although Lorenzo would gain revenue from the additional engine he sells, he would also lose revenue from the initial five engines because he would have to sell them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial five engines by selling at $90,000 rather than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $90,000. PRICE (Thousands of dollars per fire engine) 150 135 120 105 90 75 60…