2. Suppose that the market for wind chimes is a competitive market. The following graph shows the daily cost curves of a particular firm operating in this 28 V 24 ATC AVC PRICE (Dollars per wind chime) 40 36 32 20 16 12 8 4 0 0 MC + 14 16 18 20 2 4 8 10 12 QUANTITY (Thousands of wind chimes per day) 6 market: a) In short run, at a market price of $26 per wind chime, how much will firm choose to produce per day? How do you know? b) If the market price is $26 in the short run, and the firm chooses to produce the quantity you obtained in question (a), indicate the area that represents firm's profit or loss in short run on the graph. c) What is this firm's shutdown price, that is the price below which it is optimal for the firm to shut down in short run? d) In the long run, all firms can enter and exit the market, and all entrants have the same costs as above. As this market makes the transition to its long-run equilibrium, will the price rise or fall? Will the quantity demanded rise or fall? Will the quantity supplied by each firm rise or fall? Explain your answers. e) Graph the long-run supply curve in equilibrium for this market, with specific numbers on the axes as relevant.

2. Suppose that the market for wind chimes is a competitive market. The following graph shows the daily cost curves of a particular firm operating in this 28 V 24 ATC AVC PRICE (Dollars per wind chime) 40 36 32 20 16 12 8 4 0 0 MC + 14 16 18 20 2 4 8 10 12 QUANTITY (Thousands of wind chimes per day) 6 market: a) In short run, at a market price of $26 per wind chime, how much will firm choose to produce per day? How do you know? b) If the market price is $26 in the short run, and the firm chooses to produce the quantity you obtained in question (a), indicate the area that represents firm's profit or loss in short run on the graph. c) What is this firm's shutdown price, that is the price below which it is optimal for the firm to shut down in short run? d) In the long run, all firms can enter and exit the market, and all entrants have the same costs as above. As this market makes the transition to its long-run equilibrium, will the price rise or fall? Will the quantity demanded rise or fall? Will the quantity supplied by each firm rise or fall? Explain your answers. e) Graph the long-run supply curve in equilibrium for this market, with specific numbers on the axes as relevant.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

4. Profit maximization in the cost-curve diagram The following graph plots daily cost curves for a firm operating in the competitive market for motor scooters. Hint: Once you have positioned the rectangle on the graph, select a point to observe its coordinates. PRICE (Dollars per scooter) 100 90 80 70 60 50 40 40 30 ATC 20 MC AVC 10 0 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of scooters per day) Profit or Loss ? In the short run, given a market price equal to $45 per scooter, the firm should produce a daily quantity of 45,000 scooters. On the preceding graph, use the blue rectangle (circle symbols) to fill in the area that represents profit or loss of the firm given the market price of $45 and the quantity of production from your previous answer. Note: In the following question, enter a positive number regardless of whether the firm earns a profit or incurs a loss. The rectangular area represents a short-run of $ thousand per day for the firm.
The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Buddies, a purely competitive firm that produces novelty ear buds. Assume the market for novelty ear buds is a competitive market and that the price of ear buds is $6.00 per pair. Buddies Production Costs Quantity MC ATC of Ear Buds ($) ($) 25 2.20 30 2.02 2.17 35 2.45 2.21 40 3.57 2.38 45 4.00 2.56 50 5.46 2.85 55 5.93 3.13 60 8.53 3.58 Instructions: In part a, enter your answer as the closest given whole number. In parts b-d, round your answers to two decimal places. a. If Buddies wants to maximize profits, how many pairs of ear buds should it produce each week? pairs b. At the profit-maximizing quantity, what is the total cost of producing ear buds?
9. Problems and Applications Q9 The market for apple pies in the city of Ectenia is competitive and has the following demand schedule: Each producer in the market has a fixed cost of $6 and the following marginal cost: Quantity Marginal Cost (Dollars) 1 1 2 3 4 5 6 Complete the following table by computing the total cost and average total cost for each quantity produced. Quantity Total Cost Average Total Cost (Ples) (Dollars) (Dollars) 1 2 3 4 3 8 10 12 14 The price of a pie is now $11. At a price of $11, making a profit of O True O Fal pies are sold in the market. Each producer makes True or False: The market is in long-run equilibrium. Suppose that in the long run there is free entry and exit. In the long run, each producer earns a profit of each producer makes pies, so there are The market price is producers operating. pies, so there are At this price, producers in this market, each pies are sold in this market, and
Farmer Lee grows strawberries. The average total cost and marginal cost of growing strawberries in the long run for an individual farmer are illustrated in the graph to the right. Suppose the market price is $7.05 per box. If so, then farmers will strawberries until the market price is $ number rounded to two decimal places.) per box. (Enter a numeric the market for a real enter exit Price and cost (dollars per box) 10- 9- 8- 5- 3- 2- 1. 0 MC ATC 10 20 30 40 50 60 70 80 90 100 Quantity of strawberries (boxes per week) o
Suppose that the market for dress shirts is a perfectly competitive market. The following graph shows the daily cost curves of a firm operating in this market. (?) 50 45 Profit or Loss 40 35 30 АТС 25 20 15 10 AVC MC 4 8 12 16 20 24 28 32 36 40 QUANTITY OF OUTPUT (Shirts) PRICE AND COST (Dollars per shirt)
Quantity of Miami Dade Shades 1st pair 2nd pair 3rd pair 4th pair Marginal Cost (dollars) producer surplus will equal $105. there will be a surplus; as a result, the price will fall to $95. $60 95 140 185 Refer to Table 4-4. The table above lists the marginal cost of sunglasses by Miami Dade Shades, a firm that specializes in producing designer sunglasses. If the market price for a pair of Miami Dade Shades sunglasses is $130, A they will produce three pairs. B producer surplus from the first pair is $35.
Lisa’s Lawn Company (LLC) is a lawn-mowing business in a perfectly competitive market for lawn-mowing services. The following table sets out Lisa’s costs. Quantity (Lawns per hour Total Cost (dollars per lawn) 0 $30 1 40 2 55 3 75 4 100 5 130 6 165 If the market price is $30 per lawn, how many lawns per hour does Lisa’s LLC mow? If the market price is $30 per lawn, what is Lisa’s profit in the short run? If the market price falls to $20 per lawn, how many lawns per hour does Lisa’s LLC mow?
2. Suppose that the market for wind chimes is a competitive market. The following graph shows the daily cost curves of a particular firm operating in this PRICE (Dollars per wind chime) 40 b) 36 32 28 24 20 16 2 8 4 0 MC 0 2 4 + 10 12 14 16 18 20 QUANTITY (Thousands of wind chimes per day) 8 market: a) In short run, at a market price of $26 per wind chime how much will firm ATC AVC 6 the market price is $26 in th quantity you obtained in question (a), indicate the area that represents firm's profit or loss in short run on the graph. c) What is this firm's shutdown price, that is the price below which it is optimal for the firm to shut down in short run? d) In the long run, all firms can enter and exit the market, and all entrants have the same costs as above. As this market makes the transition to its long-run equilibrium, will the price rise or fall? Will the quantity demanded rise or fall? Will the quantity supplied by each firm rise or fall? Explain your answers. e) Graph the…
Suppose that the market for candles is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point. PRICE (Dollars per candle) 8 2 2 3 2 8 36 32 28 24 20 4 0 0 MC 2 ATC AVC 6 4 8 10 12 14 16 QUANTITY (Thousands of candles per day) 18 20 Profit or Loss In the short run, at a market price of $20 per candle, this firm will choose to produce On the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $20 and the firm chooses to produce the quantity you already selected. OL candles per day. a n W
Calculate Kenji's marginal revenue and marginal cost for the first seven shirts he produces, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost. ? 30 8 COSTS AND REVENUE (Dollars per shirt) 25 15 O 10 0 0 1 2 5 QUANTITY (Shirts) 3 4 6 Kenji's profit is maximized when he produces 7 8 would maximize his profit) is $ which is maximizing quantity corresponds to the intersection of the last condition can also be written as Marginal Revenue shirts. When he does this, the marginal cost of the last shirt he produces is $ which is than the price Kenji receives for each shirt he sells. The marginal cost of producing an additional shirt (that is, one more shirt than than the price Kenji receives for each shirt he sells. Therefore, Kenji's profit- curves. Because Kenji is a price taker, this Marginal Cost
Consider the competitive market for sports jackets. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 100 90 70 60 ATC 40 30 20 AVC 10 + ++++ 10 15 20 3 30 35 o 5 QUANTITY (Thousands of jackets) 50 For each price in the following table, use the graph to determine the number ofr jackets this firm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero jackets and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price. Price Quantity (Dollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? 10 20 32 COSTS (Dollars)
4. Profit maximization in the cost-curve diagram Suppose that the market for candles is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. (Note: Area in blue rectangle is shown in thousands.) 32 28 V 24 ATC AVC MC PRICE (Dollars per candle) 40 36 8 4 0 0 + 2 4 8 6 10 QUANTITY (Thousands of candles) 12 14 16 18. 20 6,000 In the short run, at a market price of $20 per candle, this firm will choose to produce candles per day. 8,000 Profit or Loss (in thousands) ? On the previous graph, 9,000 the blue rectangle (circle symbols) to shade the area (in the 12000 ands) representing the firm's profit or loss if the market price is $20 and the firm chooses to produce the quantity you already selected. Note: In the following question, you should enter a positive number in the numeric entry field. [$ The area (in thousands) of this rectangle indicates that the firm's would be per day.