MICROECONOMICS
MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
Question
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Chapter 13, Problem 11QE

(a)

To determine

The reason to not prefer a higher quantity of output.

(b)

To determine

The reason to not prefer a lower quantity of output.

(c)

To determine

Labeling of the shutdown point.

(d)

To determine

Shut down point.

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Juan makes dining room chairs in a perfectly competitive industry. He is looking for economic advice and tells you the following data about his business. (Assume cost curves have their standard shapes.) Total revenue is $120,000, Total fixed costs are $100,000 Total variable costs are $110,000 Marginal cost is $200/unit Quantity produced is 600 units What will you suggest to Juan? A: Shut down immediately B: Do not shut down and increase production C: Do not shut down but decrease production D: Do not shut down and do not change the current production level.
Use a graph to demonstrate the scenario where a competitive firm would be earning positive profit in the short run. Can this scenario be maintained in the long run? Why? What are the ‘shutdown point’ and ‘break even point’ of a competitive firm . Explain with diagram. A competitive market starts in a situation of long run equilibrium. Then there is an increase in demand. Explain what happens in the short run and long run, using necessary diagrams.
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