Illustrate to the right, a graph showing a company being profitable in a competitive market in the Long Run selling itsproduct at Market Price (MP*) based on its Average Variable Cost (AVC) and Average Total Cost (ATC) and Marginal Cost(MC). Identify each key point on the graph. Observe the Short - Run Loss information illustrated in the graph to theright. With respect to Price (P*"), Average Variable Cost (AVC), Average Total Cost (ATC), Marginal Revenue (MR), andMarginal Cost (MC), what assumption would you make if the firm was selling its product at PWhat would happen if this were to continue in the long run? Is there a Shut Down point?**? Notice that MR = P

The objective of the question is to understand the profitability of a company in a competitive…

Answered: Illustrate to the right, a graph…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Short-run supply and long-run equilibrium Consider the competitive market for titanium. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. 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.
Consider a firm that is currently producing a level of output that maximizes its profits. The firm generates revenue of $40 million per month. Each month, the firm spends $30 million on worker compensation and $20 million on renting buildings and machinery. a) What is this firm’s current monthly profit? b) Should this firm continue to operate in the short run? Why?
Using price (P), quantity (q), and average total cost (ATC), define profit rate (per unit profit), and total profits? Now assume you own a small business. Explain the difference between economic profits and accounting profits as concerns your business. What does it mean to say economic profit equals zero for your business and why does the firm continue to operate if economic profit equals zero (normal profit)?
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Consider the perfectly competitive market for titanium. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost ( MCMC ), average total cost ( ATCATC ), and average variable cost ( AVCAVC ) curves shown on the following graph
6. Deriving the short-run supply curve The following graph plots the marginal cost (MC) curve, average total cost (ATC) curve, and average variable cost (AVC) curve for a firm operating in the competitive market for sun lamps. COSTS (Dollars) 100 20 80 TO 0 □ 5 D MC-D Price (Dollars per lamp) 10 20 32 40 50 60 ATC AVC Quantity (Lamps) DO 15 QUANTITY (Thousands of lamps) 50 For every price level given in the following table, use the graph to determine the profit-maximizing quantity of lamps for the firm. Further, select whether the firm will choose to produce, shut down, or be indifferent between the two in the short run. (Assume that when price exactly equals average variable cost, the firm is indifferent between producing zero lamps and the profit-maximizing quantity of lamps.) Lastly, determine whether the firm will earn a profit, incur a loss, or break even at each price. ? Produce or Shut Down? Profit or Loss?
A perfectly competitive firm produces the level of output at which MR=MC on the rising portion of the firm’s marginal cost curve. At that output level, it has the following costs and revenues: TC = $830,000 VC = $525,000 TR = $428,000 Given that the firm produces the level of output at which MR=MC, calculate the amount of profit (loss) this firm earns. is it Profit=TR-TC?
What quantity will the firm produce if it shuts down in the short run? What will be the profits if this firm shuts down? What quantity will the firm produce to minimize losses in the short run? If this firm chooses to operate at a loss, what will its profits equal? If the cost and revenue numbers in the table will continue permanently, what will this firm choose to do?
Consider the following costs of a typical firm in a purely competitive industry. The firm has no fixed cost given only the available information, what would you except product price to be in the long run?
Profit maximization using total cost and total revenue curves Suppose Caroline runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Caroline's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Caroline produces. Caroline's profit is maximized when she produces______ shirts. When she does this, the marginal cost of the last shirt she produces is ______, which is (GREATER OR LESS) than the price Caroline receives for each shirt she sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize her profit) is _____, which is (GREATER OR LESS) than the price Caroline receives for each shirt she sells. Therefore, Caroline's profit-maximizing quantity corresponds to the…
What happens to a competitive firm whose cost function exhibits decreasing marginal cost everywhere? Construct a concrete cost function of this type and carry out the search for the profit-maximizing output.
The following diagram shows the market demand for steel. Use the orange points (square symbol) to plot the short-run industry supply curve when there are 20 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 40 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 60 firms. PRICE (Dollars per ton) 80 72 Supply (20 firms) 64 58 Demand 48 Supply (40 firms) 40 32 2 24 16 8 ° 0 120 240 360 480 600 720 840 960 1080 1200 QUANTITY OF OUTPUT (Thousands of tons) Supply (60 firms) ? If there were 60 firms in this market, the short-run equilibrium price of steel would be $ Therefore, in the long run, firms would Because you know that perfectly competitive firms earn be $ per ton. At that price, firms in this industry…

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