Use the following graph to answer parts (a)-(e). Prices and costs are in dollars. 30 /MC ‚ATC 27 24 18 15 12 6 3 4 8 12 16 20 24 28 32 36 40 `MR Quantity The graph above shows the demand (D), marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves for one of many profit-maximizing firms operating in the short run in an industry in which there are no barriers to entry. Each firm sells a similar but not identical product. (a) What will happen to total revenue if the firm raises the price from $9 to $12? Explain. (b) At 16 units, is the firm producing at the allocatively efficient quantity? Explain. (c) If the firm produces 12 units, will the firm's economic profit be positive, negative, or zero? Explain. (d) Use the relationship between the margi cost curve and the average total cost curve to explain why the average total cost curve is increasing at 20 units. (e) Calculate the consumer surplus if the firm charges the profit-maximizing price. Show your work. Price, Cost

Use the following graph to answer parts (a)-(e). Prices and costs are in dollars. 30 /MC ‚ATC 27 24 18 15 12 6 3 4 8 12 16 20 24 28 32 36 40 `MR Quantity The graph above shows the demand (D), marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves for one of many profit-maximizing firms operating in the short run in an industry in which there are no barriers to entry. Each firm sells a similar but not identical product. (a) What will happen to total revenue if the firm raises the price from $9 to $12? Explain. (b) At 16 units, is the firm producing at the allocatively efficient quantity? Explain. (c) If the firm produces 12 units, will the firm's economic profit be positive, negative, or zero? Explain. (d) Use the relationship between the margi cost curve and the average total cost curve to explain why the average total cost curve is increasing at 20 units. (e) Calculate the consumer surplus if the firm charges the profit-maximizing price. Show your work. Price, Cost

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Please answer (d) and (e) and show the answer with graphs.

Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and
curves clearly labeled and must show directional changes. If the question prompts you to “Calculate," you must show how you arrived at
your final answer.
Use the following graph to answer parts (a)-(e). Prices and costs are in dollars.
30
/MC
‚ATC
27
24
21
18
15
12
9.
6.
3
0 4 8
12 16 20
24 28 32 36 40
MR
Quantity
The graph above shows the demand (D), marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves for one of
many profit-maximizing firms operating in the short run in an industry in which there are no barriers to entry. Each firm sells a similar but
not identical product.
(a) What will happen to total revenue if the firm raises the price from $9 to $12? Explain.
(b) At 16 units, is the firm producing at the allocatively efficient quantity? Explain.
(c) If the firm produces 12 units, will the firm's economic profit be positive, negative, or zero? Explain.
(d) Use the relationship between the marginal cost curve and the average total cost curve to explain why the average total cost curve is
increasing at 20 units.
(e) Calculate the consumer surplus if the firm charges the profit-maximizing price. Show your work.
Price, Cost

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