SRATC₂SRATC3In the figure, increasing long-run average total costs forthe firm are confined to the output rangeOA. where the LRAC curve is downward sloping.B. above 80 units of output.O C. above 50 units of output.OD. between 50 and 80 units of output.SRATC₁OE. between 10 and 100 units of output.----SRATCLRAC10 203040 50 60708090 100Output per Period

The Long-Run Average Cost (LRAC) curve shows the way in which a firm's average total cost varies…

Answered: SRATC₂ SRATC3 In the figure, increasing…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 41P: A computer company produces affordable, easy-to-use home computer systems and has fixed costs of...

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Similar questions

Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are four domestic auto manufacturers, but the demand for domestic autos is no more than 2.5 times the quantity produced at the bottom of the long-run average cost curve. What do you expect will happen to the domestic auto industry in the long run?
Return to Figure 7.7. What is the marginal gain in output from increasing the number of batters from 4 to 5 and from 5 to 6? Does it continue the pattern of diminishing marginal returns? Figure 7.7 How output Affects Total costs
What is the relationship between marginal product and marginal cost? (Hint: Look at the curves.) Why do you suppose that is? Is this relationship the same in the long run as in the short run?
How does fixed cost affect marginal cost? Why is this relationship important?
How would an improvement in technology, like the high-efficiency gas turbines or Pirelli tire plant, affect me lung-nm average cost curve of a firm? Can you draw the old curve and the new one on the same axes? How might such an improvement affect other firms in the industry?
What two lines on a cost curve diagram intersect at the zero-profit point?
Based on your answers to the WipeOut Ski Company in Exercise 7.3, now imagine a situation where the firm produces a quantity of 5 units that it sells for a price of 25 each. What will be the companys profits or losses? How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? At the given quantity and price, is the marginal unit produced adding to profits?
Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?
What is die difference between accounting and economic profit?
What is a price taker firm?
Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + q2 Marginal cost: MC = q where q is an individual firms quantity produced. The market demand curve for this product is Demand:QD = 120 P where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market. a. What is each firms fixed cost? What is its variable cost? Give the equation for average total cost. b. Graph average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity? c Give the equation for each firms supply curve. d. Give the equation for the market supply curve for the short run in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market in the short run? f. In this equilibrium, how much does each firm produce? Calculate each firms profit or loss. Is there incentive for firms to enter or exit? g. In the long run with free entry and exit, what is the equilibrium price and quantity in this market? h. In this long-run equilibrium, how much does each firm produce? How many firms are in the market?
Suppose that the market price increases to 6, as Table 8.14 shows. What would happen to the profit-maximizing output level?

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