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True or false: In a perfectly competetive market, when AVP<P<ATC, a firm will not produce any output to minimize its costs. Explain why using a graph.
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- One way to increase profits in your business is to find a way to reduce your costs. Use the average cost and marginal cost curves presented in class to represent a firm that finds a way to reduce its costs. Assume the firm operates in a perfectly competitive industry, where the typical firm has no market power and free entry and exit eliminate economic profits. Use your diagram to show the economic profit the firm earns after it reduces its costs, but also use your diagram to show how the firm will adjust its price and quantity as other firms enter the industry. Complete your analysis by explaining why the price a firm receives for its product will tend to bear a relationship to its cost structure, even if competition is not perfect.Suppose Amari operates a handicraft pop-up retail shop that sells phone cases. Assume a perfectly competitive market structure for phone cases with a market price equal to $20 per phone case. The following graph shows Amari's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for phone cases for quantities zero through seven (including zero and seven) that Amari produces. TOTAL COST AND REVENUE (Dollars) 200 150 125 100 75 50 25 0 0 O Search Total Cost 20 Total Revenue Profit C Ccc UGiocattolo is a profit-maximizing firm producing toy cars, which it can produce and sell in its home country, Italy, and abroad in Spain. The average cost (AC) curve on the following graph represents Giocattolo's cost of producing toy cars within one factory, whether in Italy or in Spain. COST (Dollars per toy car) 20 18 16 14 12 10 8 4 2 0 0 10 20 30 40 50 60 70 80 QUANTITY (Thousands of toy cars) AC 90 100 Suppose that at the current market price of toy cars, the demand for Giocattolo's product is 10,000 toy cars per year in Italy and 20,000 toy cars per year in Spain. (Hint: Select each point on the previous graph to see its coordinates.) Based on Giocattolo's average cost curve, within one factory it can produce 20,000 toy cars at $ per toy car, and produce the total of 30,000 toy cars at $ per toy car. per car, produce 10,000 toy cars at
- Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.Suppose Jayden operates a handicraft pop-up retail shop that sells cardigans. Assume a perfectly competitive market structure for cardigans with a market price equal to $25 per cardigan. The following graph shows Jayden's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for cardigans for quantities zero through seven (including zero and seven) that Jayden produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 75 -25 по 0 ДО 1 2 0 O ☐ O 0 3 4 5 QUANTITY (Cardigans) O 0 6 Total Cost 7 8 Total Revenue ProfitConsider a perfectly competitive market for wheat in New York City. There are 130 firms in the industry, each of which has the cost curves shown on the following graph: 100 90 MC 80 70 60 ATC 50 40 30 AVC 20 10 5 10 15 20 25 30 35 40 45 50 QUANTITY OF OUTPUT (Thousands of bushels) COST(Cents per bushel)
- Suppose Rina runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. The following graph shows Rina's total cost curve. On the graph below, use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven frying pans that Rina produces, including zero frying pans. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 75 50 25 0 -25 □ 0 1 U 2 ■ U 3 4 5 QUANTITY (Frying pans) n 6 Total Cost 7 8 Total Revenue Profit ?Refer to the above diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is?Suppose that the market for candles is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point. PRICE (Dollars per candle) 8 2 2 3 2 8 36 32 28 24 20 4 0 0 MC 2 ATC AVC 6 4 8 10 12 14 16 QUANTITY (Thousands of candles per day) 18 20 Profit or Loss In the short run, at a market price of $20 per candle, this firm will choose to produce On the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $20 and the firm chooses to produce the quantity you already selected. OL candles per day. a n W
- The following diagrams show the market for a good, as well as the cost curves for an individual firm in the market. Assume that all firms are identical. Under current market conditions, each individual firm will be breaking even. Individual Firm Market $ MC ATC S True False 24Assume the market for coffee mugs is perfectly competitive. Firms in the market are producing output, but are currently making economic losses. a. How does the price of coffee mugs compare to the average total cost, the average variable cost, and the marginal cost of producing coffee mugs? b. Draw two graphs, side by side, illustrating the present situation for the typical firm and in the market.Please graph what the market looks like with a short decrease in demand and what one firm looks like with a short run decrease in demand. Please make sure to graph your answer with all necessary labeling.
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