6. Problems and Applications Q6 A firm in a competitive market receives $1,120 in total revenue and has marginal revenue of $20. The firm's average revenue is $ , and units were sold.
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Q: 6. Problems and Applications Q6 A firm in a competitive market receives $1,120 in total revenue…
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- The purely competitive firm in the above exhibit should a. shut down b. produce 5 units of output c. produce 10 units of output d. produce 12 units of output e. produce 20 units of output 6. At the profit-maximizing/loss-minimizing level of output, what is the firm’s profit or loss? Based on this situation, what do you recommend for the firm and why?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…Use Figure 11-5 to answer the following question(s). Cost and Revenue In long run equilibrium, this competitive firm will face a price of $6,200 units $10, 250 units $20, 300 units. $16, 300 units. $20 11 71 10 b 6 a Figure 11-5 טן MC MR ATC AVC 200 250 300 Quantity and produce 13
- 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)…13 12 11 10 9 2.) Suppose that a firm in a competitive market has the following cost curves: ↑ Price 8 7. 6.36 5. 4.5 4+ 3 2+ 1 1 2 3 4 MC J ATC AVC 5 5 6 7 8 9 10 11 Quantity a.) What price should the firm shut down below? b.) What's the range of prices where the firm would earn negative profit in the short run? c.) Below what price would the firm exit? d.) What range of prices would provide the firm positive profits? e.) At what quantity is ATC minimized? f.) What is the long run equilibrium price? What does each firm earn at that price? If the price is $5 in the short run, what happens in the long run to get the price back to the long-run equilibrium?The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 10.2 Price 50 35 30 20 10 $450 $700 10 $500 15 MC 20 MR AVC Refer to Figure 10.2. Compute the profit earned by the firm at the profit-maximizing level of output. $300 ATC Quantity
- Figure 6.1 MC ATC AVC MR2 MR, 3. 3. 3. 30 40 50 60 Quantity Refer to Figure 6.1. Given MR2, what is total revenue if the firm produces 60 units and the lowest point of the average-total-cost curve is $4? $400 $240 $440 $300 Price8. Ina sells her homegrown eggplant at a roadside stand. Assume that the industry is perfectly competitive. Draw average total cost, average variable cost and marginal cost curves. Draw the marginal revenue curve (MR) such that the price is equal to the shut-down price. Label this MR Then indicate the profit-maximizing output (Q). Label this QHow to sovle these? What's the right answer?
- Assume the table below is extracted from Dodi company Ltd a perfectly competitive firm selling cabbages. Assume that when the firm's selling price is AUD 15, the marginal revenue is also AUD15. i. Complete the table below and answer the questions that follow. Quantity (Kg) AVC AFC ATC MC 2.50 7.50 5.10 3.50 9.00 3.00 9.00 4.50 10.00 2.50 12.50 5.50 14.00 1.80 13.00 6.00 18.00 1.67 15.00 10.00 25.00 1.43 16.00 Qty = Quantity; AVC=Average variable cost; AFC = Average fixed cost; ATC=Average T otal Cost; MC= Marginal Cost; Rev = Revenue; MR= Marginal Revenue; Kg = Kilogram ii. Based on your answers to the table above, identify the profit maximizing guantiy supplied by the firm. Calculate the amount of profit/loss at this optimal point. Show your work. iii. State and examine the characteristics for a perfectly competitive firm such as Dodi Ltd selling cabbages.1. Demand and Costs. Assume you are faced with the following demand curve,P = 20-0.5QWhere P is the dollar price per unit and Q is the number of units sold per month, and Q must be2 or more.a. Write the expression (definition) for this firm’s Total Revenue (TR)b. Write the expression for this firm’s marginal revenue (MR).c. What is Q when the P is zero?d. What is P when the Q is zero?e. Profit maximization occurs where MR=MC. If MC=$10 what is the profit maximizing levelof Q and P?f. As a business owner, you are thinking about lowering the price of this product. If youlower the price by 10% from your answer in e., will your TR rise or fall?18. Select all that apply. In a perfectly competitive market, MR equals Price Average revenue Total revenue Δ in total revenue / Δ in quantity