The following diagram depicts a firm's demand curve given the economy-widedemand, and its tangent isoprofit curve. The firm faces a linear demand curve. Theworkers' average product of labour X equals 1. At B, which of the followingstatements is correct?Price, p: dollars80+W = 60Iso-profitcurveDemand curveProduction function: q = nQuantity, q: Employment, n, given aproduction function where APL = A=1200a) Profits are $16,000.b) The slope of the isoprofit curve is -0.4.c) The marginal rate of substitution is -0.1.d) The markup is 0.1.

The diagram shows the relationship between a firm's product price, its demand curve, and an…

Answered: a) Profits are $16,000. Ob) The slope…

a) Profits are $16,000. Ob) The slope of the isoprofit curve is -0.4. Oc) The marginal rate of substitution is -0.1. d) The markup is 0.1.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 15P

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Question

The following diagram depicts a firm's demand curve given the economy-wide
demand, and its tangent isoprofit curve. The firm faces a linear demand curve. The
workers' average product of labour X equals 1. At B, which of the following
statements is correct?
Price, p: dollars
80+
W = 60
Iso-profit
curve
Demand curve
Production function: q = n
Quantity, q: Employment, n, given a
production function where APL = A=1
200
a) Profits are $16,000.
b) The slope of the isoprofit curve is -0.4.
c) The marginal rate of substitution is -0.1.
d) The markup is 0.1.

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