EconomicsA firm's supply curve is key to economicreasoning. Derive the supply curve of anindividual firm in the short and in the longrun. To that end, start arguing whichassumptions on marginal returns imply afirst decreasing and then increasing averagevariable cost curve, and then make use ofshut down conditions. Explain in detail anduse appropriate diagrams.

Short-Run Supply Curve The y-axis represents price (P).The x-axis represents quantity supplied…

Answered: Economics A firm's supply curve is key…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Using the Diagram above, answer the following questions: b). Suppose this firm produces 15 units of output. What is the variable cost of producing this level of output? What is the firm’s AVC of production when it produces 15 units of output. Explain your answer fully.
a) Describe the factors that drive profits to zero in perfectly competitive markets in the long run. Explain carefully the incentives that drive the market to a long run equilibrium. b) Why would a firm choose to operate at a loss in the short run? Explain carefully. c) When do firms decide to shut down production in the short run? Explain carefully.
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Microeconomics
What is the shutdown condition? a.A condition stating when a firm should cease to operate and produce nothing, because profits are maximized when not producing b.In the short run, the shut down condition is TR < VC . In the long run, it is TR
I. A company produces at an output level where marginal cost is equal to marginal revenue and has the following revenue and cost levels: Total revenue = $1,450 Total cost = $1,500 Total variable cost = $1,300 What would you suggest? a. Shut down. b. Continue to produce because the loss is less than the total fixed cost. c. Increase production to lower the marginal cost. e. Raise the price. II. At current long-run production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. If the market is perfectly competitive, the firm should a. cut back on production. b. stop production all together. c. produce more. d. continue producing at current levels.
Draw and describe a diagram representing the cost curves – MC, AC, and AVC – for a profit-maximizing firm under perfect competition. Show U-shaped AC and AVC curves. Label the breakeven and shut down prices. Also, show a price between the breakeven and shut down prices and explain how the firm decides on its profit-maximizing/loss-minimizing output level at that price and show how the amount of profit or loss can be shown in the diagram. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
If the market price of a product is $10 that lie between the minimum average variable cost $8 (AVC) and minimum average total cost $15 (ATC) of a firm, that firm will:___________ a) always shut down. b) always continue to produce.c) produce in the short run but shut down in the long run. d) produce in the long run but shut down in the short run. e) make positive economic profits.
The following graph shows the demand curve, as well as the AVC, ATC and MC curves of a company selling rolled oats in a perfectly competitive market. Use the graph to answer the questions. The goal of the company is to maximize its profit. How many boxes of rolled oats should it sell to attain this goal? What price will it charge? How much profit does this firm make per month? Will this company produce or shut down in the short run? Why? Will this firm exit the market for rolled oats in the long run or not? Why?
Firms in the market for dog food are selling in a purely competitive market. A firm producing dog food has an output of 10,000 pounds of dog food, for which it sells for $0.50 a pound. At the output level of 10,000 pounds the average variable cost is $0.40, the average total cost is $0.70, and the marginal cost is $0.50. What do expect will happen in the long-run? Explain.
Question 5.5 T-Shirt Enterprises is selling in a purely competitive market. It is producing 3,000 units, selling them for $2 each. At this level of output, the average total cost is $2.50 and the average variable cost is $2.20. Based on these data, the firm should shut down in the short run. decrease output to 2,500 units. ontinue to produce 3,000 units. increase output to 3,500 units.
Use the values for a perfectly competitive firm below to answer the questions: Price Quantity Total Cost Fixed Cost Variable Cost $10 2,000 $24,000 $8,000 $16,000 (A) Should this firm shut down in the short run? (B) Assume this firm's total costs do not change in the long run. Should this firm exit in the long run? (C) Are your answers to (a) and (b) different? Explain in one to four sentences.

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