### Cost Structure Analysis in a Competitive Market**Table: Firm's Cost Structure**| Output | Total Cost ||--------|------------|| 0 | $5 || 1 | $10 || 2 | $12 || 3 | $15 || 4 | $24 || 5 | $40 |**Analysis Scenario**Given a market price of $4, evaluate the firm's production decisions:- **Option a:** Produce two units in the short run and exit in the long run.- **Option b:** Produce three units in the short run and exit in the long run.- **Option c:** Produce four units in the short run and exit in the long run.- **Option d:** Shut down in the short run and exit in the long run.### ExplanationThis exercise analyzes how a firm in a competitive market decides its production level and whether to continue operations based on cost and market price.

25. A firm in a competitive market has the following cost structure: Output Total Cost $5 $10 $12 $15 $24 $40 1 3 4 5 If the market price is $4 this firm will a. produce two units in the short run and exit in the long run b. produce three units in the short run and exit in the long run c. produce four units in the short run and exit in the long run d. shut down in the short run and exit in the long run

25. A firm in a competitive market has the following cost structure: Output Total Cost $5 $10 $12 $15 $24 $40 1 3 4 5 If the market price is $4 this firm will a. produce two units in the short run and exit in the long run b. produce three units in the short run and exit in the long run c. produce four units in the short run and exit in the long run d. shut down in the short run and exit in the long run

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. The following table shows the cost information for a perfectly competitive firm. Production Total variable cost (RM)0 01 1002 1503 2104 2905 4006 5407 7208 950 a. If the total fixed cost of the firm is RM300, calculate total cost, average cost and marginal cost. b. If the market price is RM200, calculate the firm total revenue, and total profit/loss c. Determine the level of production that will maximise the firms profits.
If the price that a firm with no market power receives is $10, its minimum AVC is $8 and its minimum ATC is $15 then Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a. the firm will make a loss and shut down immediately b. the firm can make a profit c. it will make a loss and choose to continue to produce in the short run d. the firm enjoys increasing returns to scale. e. None of the above.
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3. Illustrate short run supply curve for a perfectly competitive firm and derive market supply curve.
Profits are maximized at the output at which marginal cost equals marginal revenue. If the market price falls below the minimum average variable cost: a. None of the responses apply b. the firm should produce less. c. the firm should produce more. d. the firm should shut down.
Discuss the shape of the long-run supply curve in a perfectly competitive market. The long-run supply curve is A. an upward-sloping line equal to the sum of the portion of each firm's marginal cost curve that is above minimum average variable cost. B. a horizontal line equal to the minimum point on the typical firm's average total cost curve. C. an upward-sloping line equal to the sum of each firm's marginal cost curve. D. a horizontal line equal to the minimum point on the typical firm's average variable cost curve. E. an upward-sloping line equal to the sum of each firm's supply curve. Suppose that the perfectly competitive market illustrated in the graph to the right is initially in long-run equilibrium (at P₁) and then there is a permanent decrease in the demand for the product (to D₂). Show how the market adjusts in the long run. 1.) Use the line drawing tool to add either a new demand curve or a new supply curve showing the market in long-run equilibrium. Properly label this…
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question # 1 with a brif explanation.
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.
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1. The Lotsa Pasta Company sells pasta in a perfectly competitive market at a price of $2 per pound. Its marginal cost, average variable cost, and average total cost curves in the short run can be seen below: price 2 MC ATC AVC d=MR q Find the profit-maximizing level of output and mark it q*. Shade in the area of profit earned by the firm. Is it positive or negative?