Homework (Ch 14)6. Deriving the short-run supply curveThe following graph plots the marginal cost (MC) curve, average total cost (ATC) curve, and average variable cost (AVC) curve for a firm operating inthe competitive market for snapback hats.COSTS (Dollars)8072645648ATC3224168AVCMC-°81624 32 40 4856 647280QUANTITY (Thousands of snapbacks)

Approach to solving the questionDetailed explanation: Examples: Key references

Answered: Homework (Ch 14) 6. Deriving the…

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 4.7P

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What two lines on a cost curve diagram intersect at the shutdown point?
A computer company produces affordable, easy-to-use home computer systems and has fixed costs of 250. The marginal cost of producing computers is 700 for the first computer, 250 for the second, 300 for the third, 350 for the fourth, 430 for the fifth, 450 for the sixth, and 500 for the seventh. Create a table that shows the companys output, total cost, marginal cost, average cost, variable cost, and average variable cost. At what price is the zero-profit point? At what price is the shutdown point? If the company sells the computers for 500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss. If the firm sells the computers for 300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss.
What is a price taker firm?
Figure: Cost Curves for Corn Producers Price, cost of bushel $30 26 MC 22 18 ATC AVC 14 10 1 3 4 7 Quantity of corn (bushels) Reference: Ref 12-3 (Figure: Cost Curves for Corn Producers) Look at the figure Cost Curves for Corn Producers. The market for corn is perfectly competitive. If the price of a bushel of corn is $10, in the short run, the farmer will produce of corn and earn an ec omic equal to 2 bushels; profit; $0 2 bushels; loss; just more than $80 per bushel 3 bushels; profit; loss, -$15 4 bushels; profit; just less than $80 per bushel
Price and cost (dollars per mug) NA a ∞ ONA a 16 0 5 10 15 20 25 30 35 40 45 50 Quantity (mugs per day) $160; $280 The figure above shows Mollie's Mugs' costs producing mugs. The mug market is perfectly competitive. If the market price of a mug falls to $5 and Mollie's shuts down temporarily, its total variable cost is per day and it incurs an economic loss of per day. $8; $14 MC $0; $120 ATC AVC $0; $6
The accompanying graph depicts the cost curves of an individual firm in a perfectly (or purely) competitive industry.
The following graph plots daily cost curves for a firm operating in the competitive market for demin overalls. Hint: Once you have positioned the rectangle on the graph, select a point to observe its coordinates. PRICE (Dollars per overalls) 50 45 40 35 15 10 5 0 0 2 MC ATC AVC 10 12 4 8 14 16 QUANTITY (Thousands of overallses per day) 18 20 In the short run, given a market price equal to $15 per overalls, the firm should produce a daily quantity of The rectangular area represents a short-run Profit or Loss On the preceding graph, use the blue rectangle (circle symbols) to fill in the area that represents profit or loss of the firm given the market price of $15 and the quantity of production from your previous answer. Note: In the following question, enter a positive number regardless of whether the firm earns a profit or incurs a loss. of $ overallses. thousand per day for the firm.
Graph represents the cost structure of an individual firm in a perfectly competitive market. If the price decreases to $25, find the profit maximizing output of firm A by explaining the profit maximizing condition for a perfectly competitive firm. Calculate total revenue, total cost, total variable cost and the profit of the firm at the profit maximizing output.
Q26
Explain why profit is greatest at this rate of output If fixed costs were $10 higher than those stated, what would happen to the rate of output and price at which the firm would produce in the short run?
Answer the question on the basis of the following demand and cost data for a specific firm. Demand Data Cost Data (1) Price (2) Price (3) Quantity Output Total Cost $12.00 10.00 6 6 $61 11.00 8.85 7 7 62 10.00 8.00 8 8 64 9.00 7.00 9 9 67 8.00 6.10 10 10 72 7.00 5.00 11 11 79 6.00 4.15 12 12 86 Suppose that entry into this industry changes this firm's demand schedule from columns (1) and (3) to columns (2) and (3). We can conclude that this industry is A) monopolistically competitive B) A pure monopoly C) a constant cost industry D) purely competitive
The following graph plots daily cost curves for a firm operating in the competitive market for instant pots. PRICE (Dollars per instant pot) 100 90 80 70 60 50 40 30 20 10 0 0 D 5 25.00 70.00 Price (Dollars per instant pot) MC 100.00 ATC AVC 10 15 20 25 30 35 40 QUANTITY (Thousands of instant pots) Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) Quantity (Instant pots) 45 50 Total Revenue Fixed Cost (Dollars) (Dollars) 1,600,000 1,600,000 1,600,000 Variable Cost (Dollars) Profit (Dollars) If the firm shuts down, it must incur its fixed costs (FC) in the short run. In…

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