CONNECT F/MICROECONOMICS
21st Edition
ISBN: 2810022151240
Author: McConnell
Publisher: MCG
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Question
Chapter 11.6, Problem 1QQ
To determine
Price determination.
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Please do a,b,c,d,e
The following figure shows the marginal cost curve, average total cost curve, average variable cost curve, and marginal
revenue curve for a firm for different levels of output.
Price
R
W
S
L
0
A
F
B
G
C
M
At the profit-maximizing level of output:
MC
ATC
AVC
MR
Quantity
a. the firm is earning economic profit.
b. profits per unit are the highest relative to all other output choices.
c. profit equals ZC.
d. costs exceed revenue.
Price
Average total cost
AVC
Demand
Marginal
cost
Marginal revenue
Q
Quantity
Discuss the firm plotted on the figure. What type of firm do you see?is the firm operating at the optimal point of production? is the firm making a proht? s the firm operating in
the short or in the long run?
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Similar questions
- Consider the following graph to answer questions 1) Find the total cost when the firm maximizes profit. 2) Find the CS when the firm maximizes profit. (Don't forget to multiply 0.5 to get the area of a triangle.)arrow_forwardA Milton company works in perfect competition market, its total cost curve in short run isgiven in this function:TC = 200 − 4Q + 0.5Q2a. What output level should the firm produce to maximize profit? knowing that averagerevenue is $10.b. What is the firm profit at this level of output?arrow_forwardThe short-run supply curve for a price-taking firm is given by: Select one: a. its short-run marginal cost curve above average fixed cost b. its entire short-run marginal cost curve c. its short-run marginal cost curve above minimum average total cost d. its short-run marginal cost curve above minimum average variable cost e. the positively sloped portion of its average cost curvearrow_forward
- Price MC ATC IC MR Quantity a. What area(s) of the graph represent(s) total revenue for this firm if it was profit maximizing? b. What area(s) of the graph represent(s) total cost for this firm if it was profit maximizing? c. What area(s) of the graph represent(s) profits for this firm if it was profit maximizing? d. What area(s) of the graph represent(s) deadweight loss if the firm was profit maximizing?arrow_forwardhandwrittarrow_forwardThe following figure shows the marginal cost curve, average total cost curve, average variable cost curve, and marginal revenue curve for a firm for different levels of output. Price R W S 0 A F H B G MC K ATC AVC MR Quantity Assuming that price at OR is $10, the profit maximizing level of output for the firm is 1. OA where marginal cost just covers AVC 2. OB where average profit per unit is the greatest 3. OC where marginal cost equals the $10 price 4. OK where average cost equals marginal revenue and the firm earns a normal rate of returnarrow_forward
- Draw the cost curves for a typical firm. For a given price, explain how the firm chooses the level of output that maximizes profit. At that level of output, show on your graph the total revenue of the firm. Show its total costs.arrow_forwardExplain the law of diminishing returns. Asaparrow_forwardExplain the law of diminishing returns.asaparrow_forward
- In the figure below, the firm's initial average total cost curve is SRAC with an initial marginal cost curve of SRMC. The price of the product is Pl. In the short run the firm will produce output equal to the amount SRMC LRAC SRAC P1 Q1 Q2 Q3 Quantity (per day) Q4 O a. Q2 O b. Q4 Oc. Q1 93 Price and costs (dollars)arrow_forwardA profit-maximizing firm in a competitive market is currently producing 500 units of output. It has average revenue of $10, average total cost of $8, and fixed costs of $200. a. What is its profit? b. What is its marginal cost? c. What is its average variable cost? d. Is the efficient scale of the firm more than, less than, or exactly 100 units?arrow_forwardConsider a kettle firm A in a perfectly competitive market. Table 1 shows the quantity produced per hour (Q) and the total cost (TC) in the short run. Quantity 0 12345C70 2 6 8 Total cost 17 30 40 55 75 100 130 165 210 Fixed cost 17 17 17 17 17 17 17 17arrow_forward
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