Suppose a profit maximizing, perfectly competitive firm is collecting $1,700 in total revenues and the total costs of its variable factors of production are $1,900 at its current level of output. One can predict that the firm will Earn a loss but continue to operate Earn a profit Raise its price Shut down O Increase its output
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- a.Suppose a perfectly competitive firm can produce10000 bushels of corn a year at an output at which marginal revenue is equal to marginal cost. The market price of corn per bushel is $2. The firm's total costs per year are $30000 and fixed costs per year are $15000. Show and explain which of the following is true: In the short run, this firm should a) Produce 20000 bushels to try to increase economic profit. b) Produce 10000 bushels of corn because, although they are losing money, they are losing less than if they shut down. c)Shut down. d) Continue producing until the price of corn increases. b.A perfectly competitive firm, with MC=q operates in a market character,zed by the following market demand and supply conditions: Demand: Q=20000-100P Supply: Q=100P How much output does this competitive firm produce to maximize profit? Show your work graphically and algebraically.Assume you look at the graph of a perfectly competitive firm and its average total cost curve is entirely above the horizontal price line. In this case the firm is breaking even. O True O FalseBrody's firm produces trumpets in a perfectly competitive market. The table below shows Brody's total variable cost. He has a fixed cost of $240, and the price per trumpet is $60.-Calculate the average total cost of producing 6 trumpets. Show your work. -Calculate the marginal cost of producing the 11th trumpet. -What is Brody's profit-maximizing quantity? Use marginal analysis to explain your answer. -At the profit-maximizing quantity you determined in part (c), calculate Brody's profit or loss. Show your work. -Brody also produces saxophones at a loss in a perfectly competitive market. Draw a correctly labeled graph for Brody's firm showing the following at a market price of $200. -Brody's profit-maximizing quantity of saxophones -Brody's loss, completely shaded Quantity Total Variable cost 6 $120 7 $145 8 $165 9 $220 10 $290 11 $390
- Question 25 Use the graph below to answer the following question: MC AVC # Q5 P4 P3 Ⓡ P2 ↑Price P1 Q1Q2 Q3 Q4 ATC Quantity If the market price is less than P3 and greater than P2, in the short run, the perfectly competitive firm will earn O positive economic profit zero economic profit. O negative economic profit and shut down. O negative economic profit but continue to produce output.Consider the following costs of a typical firm in a purely competitive industry. The firm has no fixed costs (average total cost = average variable cost). Average Total Cost Quantity Marginal Cost 1 $28.00 2 20.50 $13.00 3 16.67 9.00 4 15.25 11.00 16.00 19.00 6 18.83 33.00 a. Given only the information available, what would you expect product price to be in the long run? O $11.00 O $19.00 O $16.00 O $15.25 b. What would you expect price to be in the short run? O $9.00 O $13.00 O $11.00 O $19.00Which of the following is an expression of profit for a perfectly competitive firm? Profit for a perfectly competitive firm can be expressed as ⒸA. Profit=(PxQ)-(TCxQ), where P is price, Q is output, and TC is total cost. OB. Profit=P-MC, where P is price and MC is marginal cost. OC. Profit=PxQ, where is price and Q is output. O D. Profit=P-ATC, where P is price and ATC is average total cost. O E. Profit= (P-ATC) XQ, where P is price, Q is output, and ATC is average total cost.
- 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 snapback hats. COSTS (Dollars) 100 100 80 90 80 20 70 70 HD 50 40 30 20 0 11 D 10 O MC Price (Dollars per snapback) 15 15 20 25 55 70 85 201 ATC 0 D AVC O 50 60 70 80 QUANTITY (Thousands of snapbacks) For every price level given in the following table, use the graph to determine the profit-maximizing quantity of snapbacks 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 snapbacks and the profit-maximizing quantity of snapbacks.) Lastly, determine whether the firm will earn a profit, incur a loss, or break even at each price. □ Quantity (Snapbacks) BO 100 ▼ On the following graph, use the orange points (square symbol) to…The graph below summarizes the demand and costs for a firm that operates in a perfectly competitive market. Instructions: Use the nearest whole numbers on the graph when calculating numerical responses below. " A graph summarizes the demand and costs for a firm that operates in a perfectly competitive market.""The horizontal axis labeled quantity ranges from 0 to 11 in increments of 1. The vertical axis labeled dollar ranges from 0 to 48 in increments of 4. A horizontal line labeled D-superscript f = M R enters the quadrant through the point (0, 28). An upward-facing curve labeled M C begins at the point (0.5, 20) goes down to the right with decreasing steepness to a low point at (3.5, 8) then goes up to the right with increasing steepness to end at the point (8, 40). A second upward-facing curve labeled A V C begins at the point (0.5, 22) goes down to the right with decreasing steepness to a low point at (5, 12) then goes up to the right with increasing steepness to end at the…Price and Cost ($) Given the information from the figure, if price equals $0.40, the firm should ATC 1.2 AVC 0.8 0.6 0.4 0.2 0.2 0.4 9'0 0.8 Output 1.2 O stay open because it is making an economic profit O stay open in the short run only because it is operating at an economic loss O stay open because it is making a normal profit O shut down in the short run because it will minimize its loss
- Question 18 Suppose a perfectly competitive firm faces the following situation: P = $10, output= 3,000, ATC= $8.50, MC $11, and AVC=$7.50. Which statement accurately describes the firm's situation? = O The firm incurs a loss and is minimizing its losses. O The firm carns a profit but should increase output to maximize its profits. O The firm is maximizing its profits. The firm earns a profit but should decrease output to maximize its profits.Suppose a perfectly competitive firm is experiencing short run economic losses. The firm will remain in the industry as long as a) marginal revenue equal to marginal cost b) price is greater than its minimum average variable cost O c) total revenue and total cost d) total revenue and average total costRefer to the accompanying figure. If the market for doughnuts is perfectly competitive, then assuming this firm can earn enough revenue to cover its variable cost, it should produce: Price (S/doughnut) 0.35 p 0.30 0.25 0.20 0.15 0.10 0.05 0 0 10 20 30 40 50 60 Marginal Cost 70 80 90 Quantity (doughnuts/day) Average Total Cost 50 doughnuts per day. the quantity of doughnuts at which average total cost is minimized. the quantity of doughnuts at which average total cost equals the market price. the quantity of doughnuts at which marginal cost equals the market price.