d. At - units, profit margin (or average profit) is maximized. Why is this output level different from the answer to parta? 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
d. At - units, profit margin (or average profit) is maximized. Why is this output level different from the answer to parta? 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
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
economics. answer only d,e,f
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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