Answered: in short run even if it makes negative…

Business

Economics

in short run even if it makes negative profit. Use well labeled

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter24: Perfect Competition

Section: Chapter Questions

Problem 3E

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Explain why a firm carries on production in short run even if it makes negative profit. Use well labeled diagrams to support your explanation.

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If you're a manager in a highly competitive business such where should you put your most effort to maximize profit? Pricing or cost cutting?
Small “Mom and Pop" firms sometimes exist even though they do not earn economic profits. How can you explain this? Think about what all is covered in economic profit?
Marginal revenue must exceed marginal cost.Explain why?
Thinking on the Margin to Increase Profitability Have you ever walked into a restaurant for lunch and found it almost empty? Why, you might ask, does the restaurant even bother to stay open? It might seem that the revenue from so few customers could possible cover the cost of running the restaurant. Provide an opinion using the concepts of sunk costs, marginal cost and marginal revenue.
Juan makes dining room chairs in a perfectly competitive industry. He is looking for economic advice and tells you the following data about his business. (Assume cost curves have their standard shapes.) Total revenue is $120,000, Total fixed costs are $100,000 Total variable costs are $110,000 Marginal cost is $200/unit Quantity produced is 600 units What will you suggest to Juan? A: Shut down immediately B: Do not shut down and increase production C: Do not shut down but decrease production D: Do not shut down and do not change the current production level.
In the short run, the firm should
Why do a firm's profit disappear in the long run?
Price and Cost 961 The graph below contains the relevant cost curves for a perfectly (or purely) competitive firm. The graph below is not graded. You can move point A to help you answer the questions. 1000 900 800 700 600 500 400 300 200 100 0 0 MC Quantity ATC AVC AFC 100 200 300 400 500 600 700 800 900 1000 860 The price of the good must be above what point for the firm to earn positive economic profits? Number $ 600 What is the shutdown price for this firm? Number $400
List the conditions that must exist for a firm to make economic profits over the long run
Soft drink industry has been historically profitable why? compare the economies of the concentrate business to the economics of the bottling business. Why do you think the profitability is so different between these businesses?
(1) Use the graph to answer the question below. The quantity is measured in thousands of units. What will this firm decide to do in the long run? A-It will stay in the market because the price is above its AVC at its profit-maximizing output. B-It will leave the market because the price is below its ATC at its profit-maximizing output. C-It will increase its price to point B to earn normal profit. D-It will increase its output until its profit-maximizing output level is equal to B. E-Insufficient data to determine. (2) A dairy farmer is operating in a perfectly competitive market. The market price for milk is between the farmer's average variable cost and average total cost at the profit-maximizing level of output. What will the farmer do? A-Produce more milk. B-Produce less milk. C-Shut down in the short run. D-Operate in the short run and leave the industry in the long run. E-Insufficient information to determine (3) A firm operating in a perfectly competitive market cannot…
Tomato Farms is selling tomatoes in a purely competitive market. Its output is 25,000 bushels, which sell for $30 a bushel. At this level of output, the marginal cost is $30 a bushel, average variable cost is $30.50 a bushel, and average total cost is $34.50 a bushel. (a) What is the firm’s total fixed cost? You must show your work.