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Answer questions below using the cost curves for the price-taking firm shown in the following graph: SMC ATC €0 A a 5 Price and cost (dallan) T AVC

Answer questions below using the cost curves for the price-taking firm shown in the following graph: SMC ATC €0 A a 5 Price and cost (dallan) T AVC

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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economics. answer only g,h

2. Answer the questions below using the cost curves for the price-taking firm shown in the following graph: SMC ATC AVC 0 100 200 300 400 500 600 700 800 900 Output a. If price is $7 per unit of output, draw the marginal revenue curve. The manager should produce units to maximize profit. b. Because average total cost is $ for this output, total cost is $ c. The firm makes a profit of $ d. At. units, profit margin (or average profit) is maximized. Why is this output level different from the answer to part a? e. Let price fall to $3, and draw the new marginal revenue curve. The manager should now produce units to maximize profit. f. Total revenue is now $ and total cost is $ The firm makes a loss of $ g. Total variable cost is $ „ leaving $ to apply to fixed cost. k. If price falls below $ the firm will produce zero output. Explain why. O OD 7 Price and cost (dollars) 2 0 40 4 2 T
Transcribed Image Text:2. Answer the questions below using the cost curves for the price-taking firm shown in the following graph: SMC ATC AVC 0 100 200 300 400 500 600 700 800 900 Output a. If price is $7 per unit of output, draw the marginal revenue curve. The manager should produce units to maximize profit. b. Because average total cost is $ for this output, total cost is $ c. The firm makes a profit of $ d. At. units, profit margin (or average profit) is maximized. Why is this output level different from the answer to part a? e. Let price fall to $3, and draw the new marginal revenue curve. The manager should now produce units to maximize profit. f. Total revenue is now $ and total cost is $ The firm makes a loss of $ g. Total variable cost is $ „ leaving $ to apply to fixed cost. k. If price falls below $ the firm will produce zero output. Explain why. O OD 7 Price and cost (dollars) 2 0 40 4 2 T
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