MANAGERIAL ECONOMICS
5th Edition
ISBN: 9781337106658
Author: FROEB
Publisher: CENGAGE L
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Chapter 12, Problem 7MC
To determine
Pricing of the good.
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Which statements are true regarding economies of scale?
Choose one or more:
A. Economies of scale typically cause an industry to be perfectly competitive.
B. To maximize profits, a monopoly that occurs because of economies of scale should produce an
output so that marginal revenue equals marginal costs.
C. A firm that has economies of scale sees its average total costs decrease when production
increases.
D. When a firm has a natural monopoly, it has that type of monopoly because of economies of scale.
Firms must typically purchase inputs from suppliers to produce output.
What effect might suppliers have on an industry?
A.
If many firms can supply an input comma then suppliers are like to have the bargaining power to limit a firm's profits.
B.
If suppliers are price takers, then a firm will likely be a price taker with no ability to raise price.
C.
If an input is specialized comma then the supplier is likely to have the bargaining power to limit a firm's profits.
D.
Suppliers cannot affect output markets, although an output market with only a few firms is likely to have the bargaining power to limit a supplier's profits.
E.
If only a few firms can supply an input, then markets will likely experience shortages because firms are unable to produce sufficient output.
Should a firm shut down if its revenues is TR = $1,500 per week and:
a. its variable cost is TVC = $1,100 and its sunk fixed cost is TFC = $800?
b. its TVC = $1,600 and is TFC = $600?
c. its TVC = $1,100 and its TFC = $1000 ($800 of which is avoidable if it shuts down?)
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- 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? use this to solve A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, average total cost of $8, and fixed costs of $200.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_forwardAssume that a firm in a competitive market faces the following cost information. If the market price for this firm's product is $40, calculate the profit maximizing level of output for this firm using marginal analysis. a.Approximately where do you think the price will end up in this market over the long run? b.Last, instead of assuming a given price, how would you go about finding the equilibrium price if you were given information on market demand?arrow_forward
- Price or Cost(dollars per unit) Pc MR Later C2 MR B MC Demand QE QC QB QA Later ATC Demand Quantity (units per period) 3. Refer to the graph above. Identify each of the following market outcomes: a. Short-run equilibrium output in perfect competition. b. Long-run equilibrium output in perfect competition. c. Long-run equilibrium price in perfect competition. d. Long-run equilibrium output in monopoly. e. Long-run equilibrium output in monopolistic competition.arrow_forwardBased on the given graph:a. If this firm profit-maximizes, how much output will it produce and what price will it charge? b. When this firm profit maximizes, what (compute) is the firm’s profit or loss? Is this firm in a short run or long run equilibrium? Why? c. Does the firm minimize cost? Why or why not? How much excess capacity does this firm have?arrow_forwardIn the short run, perfectly (or purely) competitive firms will maximize their profit by producing (select all options that apply): a. a quantity where marginal revenue > marginal cost. b. the quantity where marginal revenue = marginal cost. c. the largest quantity possible, not considering costs or revenues. d. a small quantity to drive up the price. e. the quantity where price equals marginal cost. f. none of the above are correct.arrow_forward
- The Orlando Magic is the National Basketball Association (NBA) professional basketball team that plays at the Amway Center in downtown Orlando. Which of the answer choices best describes a VARIABLE COST for the Orlando Magic? O The Magic's advertising expense for its "Go Magic!" television commercials. The Magic's 13-player roster, including guard Devin Cannady and center Mo Bamba. O The Magic's ticket price of $257 to sit in the Legends Seats. The rent that the Magic pays the City of Orlando for use of the Amway Center.arrow_forwardWhat happens when more and more firms enter an industry? a) Decline in economic profits b) An increase in the accounting profits c) An increase in price d) A decline in production Answer A В Darrow_forwardAssume that the gold-mining industry is perfectly competitive. a) Illustrate a long-run equilibrium using diagrams for the gold market and for a representative gold mine. b) Suppose that an increase in jewelry demand induces a surge in the demand for gold. Using your diagrams, show what happens in the short run to the gold market and to each existing gold mine. c) If the demand for gold remains high, what would happen to the price over time? Specifically, would the new long-run equilibrium price be above, below, or equal to the short-run equilibrium price in part b)? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
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