### Economics Exercise: Profit MaximizationThis exercise focuses on determining the profit-maximizing output level, price, and economic profit for a firm.#### Questions:**a. The profit-maximizing output level is:**- ○ 3 units.- ○ 4 units.- ○ 2.5 units.- ○ 4.5 units.**b. The profit-maximizing price is:**- ○ $32.50.- ○ $25.- ○ $40.- ○ $14.30.**c. The firm has an economic profit of:**- ○ -$30.00.- ○ $30.00.- ○ $0.- ○ $18.75.Analyze each question carefully to determine the optimal decision-making strategy that maximizes profit based on the choices given. **Title: Revenue and Cost Conditions in Monopolistic Competition****Introduction:**The diagram displays the relationships between revenue, cost, demand, marginal cost (MC), average total cost (ATC), marginal revenue (MR), and demand for a monopolistically competitive firm. Understanding these concepts is crucial for analyzing the firm's pricing and output decisions.**Diagram Explanation:**- **Axes:** - The vertical axis represents "Price and Costs" ranging from $0 to $70. - The horizontal axis represents "Quantity" ranging from 0 to 7 units.- **Curves:** - **Demand Curve:** Downward sloping, indicating the inverse relationship between price and quantity demanded. - **MR (Marginal Revenue) Curve:** Lies below the demand curve, showing how additional revenue from selling an extra unit decreases as quantity increases. - **MC (Marginal Cost) Curve:** Upward sloping, representing the increase in cost with each additional unit produced. - **ATC (Average Total Cost) Curve:** U-shaped, reflecting how costs per unit change with the level of production.**Key Points on the Graph:**- **Intersection of MR and MC:** Indicates the profit-maximizing output level.- **Points on Demand Curve:** - At quantity 0.5, price is approximately $40. - At quantity 2.0, price is approximately $32.50. - At quantity 2.5, price is approximately $25. - At quantity 3.0, price is approximately $20. - At quantity 4.0, price is approximately $14.30.**Conclusion:**In monopolistic competition, firms aim to maximize profit where MR equals MC. Prices are determined based on the demand curve at this output level, while the firm's cost structures impact its overall pricing strategy and potential economic profits. Understanding these dynamics is vital for firms to operate efficiently and remain competitive in the market.

At profit maximization, MR = MC and price is determined by the demand curve.

Answered: a. The profit-maximizing output level…

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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n8 1 out of question Refer to the information provided in Figure below to answer the question that follow. Price per bushel O 43197 15 4 0 Cost and demand conditions MC ATC AVC Select one: O 11 Refer to Figure If this farmer is maximizing profit, his profit (or loss) is d-MR 3 6 9 12 16 17 q Bushels of wheat a. $48. b. $156. c. $72. d. -$24.
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Refer to the information provided in Figure 9.4 below to answer the question(s) that follow. MC AVC d%3 MR 100 Units of output Agure 9.4 Refer to Figure 9.4. In the short run, if economic conditions do not change, this firm should produce units of output and will earn a total revenue O a. 100; of $800 O b. 0; of S0 less than 100; > $0 but $800 Price per unit
A firm facing a demand curve will have zero quantity demanded if it raises its price above the market price. a. perfectly elastic O b. relatively elastic O c. relatively inelastic O d. perfectly inelastic A perfectly competitive firm is breaking even. In the short run it should In the long run it should a. produce where MC = MR; keep the same production level O b. produce where MC = MR; leave the industry O c. shut down; exit the industry O d. shut down; expand
6. Refer to Narrative 16-1. When Peter maximizes his profits, what is his total cost per day?
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If a firm is a price-taker, then Select one: O a. marginal revenue is equal to price O b. the firm can sell as much output as it likes at the market-determined price O c. marginal revenue is equal to total revenue O d. both a and b
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a. The profit-maximizing output level is O 3 units. O4 units. O 2.5 units. O 4.5 units. b. The profit-maximizing price is ces O $32.50. O $25. O $40. O $14.30. c. The firm has an economic profit of O -$30.00. O $30.00. O $0.