Essentials of Economics (MindTap Course List)
7th Edition
ISBN: 9781285165950
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 13, Problem 4QCMC
To determine
Theshort run and long run effects of the competitive market.
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Students have asked these similar questions
A profit-maximizing firm is producing where MR = MC and has an average total cost of $4, but it gets a price of $3 for each good it sells.a. What would you advise the firm to do?
The firm should shut down in the short run and exit the market in the long run.
The firm is producing where MR = MC, so it should produce in both the short run and long run.
As long as average variable costs are less than $3, in the short run, the firm should produce. In the long run, it should exit the market.
The firm should shut down in the short run. Once the firm recoups its fixed costs, it should produce in the long run.
b. What would you advise the firm to do if you knew average variable costs were $3.50?
The firm should exit the market in the long run, but it should produce in the short run since it is covering average fixed costs.
The firm should shut down in the short run. Once the firm recoups its fixed costs, it should reopen in the long run.
The firm…
Below is a graphical illustration of a
typical firm operating in a
monopolistically competitive industry:
P5
P4
P3
P2
P1
H
Q1 Q2 Q3
Refer to the graph above to answe
question. Which of the following
statements is correct?
ATC
S
A 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?
Chapter 13 Solutions
Essentials of Economics (MindTap Course List)
Ch. 13.1 - Prob. 1QQCh. 13.2 - How does a competitive firm determine its...Ch. 13.3 - Prob. 3QQCh. 13 - Prob. 1QRCh. 13 - Prob. 2QRCh. 13 - Prob. 3QRCh. 13 - Prob. 4QRCh. 13 - Prob. 5QRCh. 13 - Prob. 6QRCh. 13 - Prob. 7QR
Ch. 13 - Prob. 8QRCh. 13 - Prob. 1QCMCCh. 13 - Prob. 2QCMCCh. 13 - Prob. 3QCMCCh. 13 - Prob. 4QCMCCh. 13 - Prob. 5QCMCCh. 13 - Prob. 6QCMCCh. 13 - Prob. 1PACh. 13 - Prob. 2PACh. 13 - Prob. 3PACh. 13 - Prob. 4PACh. 13 - Prob. 5PACh. 13 - Prob. 6PACh. 13 - A firm in a competitive market receives 500 in...Ch. 13 - Prob. 8PACh. 13 - Prob. 9PACh. 13 - Prob. 10PACh. 13 - Prob. 11PACh. 13 - Prob. 12PA
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- My answer was wrong can I be shown explained what the right answer is?arrow_forwardIf firms can easily enter and exit a market, then A. firms will earn zero economic profit in the short run. B. firms will produce at minimum average fixed cost in the long run. C. firms will produce where price is greater than marginal cost. D. firms will produce where price is greater than marginal revenue. E. firms will produce at minimum average cost in the long run.arrow_forwardConsider the following data: equilibrium price = $7.50, quantity of output produced 100 units, average total cost = $9, and average variable cost = $8. What will the firm do and why? = a. Shut down in the short run, because price is below average variable cost. b. Shut down in the short run, because price is below average total cost. c. Continue to produce in the short run, because price is greater than average variable cost. d. Continue to produce in the short run, because firms are always stuck with having to produce in the short run.arrow_forward
- Which of the following indicates an extremely profitable market in the short-run? a. Many more firms leave the market than join it. b. A great many firms rush to join the market. c. The number of firms in the market remains stable. d. A few more firms join market than leave it. How can a firm avoid fixed costs in the long run? a. by incorporating b. by exiting c. by shutting down d. by expandingarrow_forwardAt what point should firms shut down in the short run? a. when marginal revenue equals marginal costs b. when average revenue is below average costs c. when average revenue is above average total cost d. when average revenue is below average variable costsarrow_forwardWould a firm earning zero economic profit continue to produce, even in the long run? In long-run competitive equilibrium, a firm earning zero economic profit A. will not continue to produce because this return is not covering its opportunity costs. B. will not continue to produce because it would be better off shutting down. C. will not continue to produce because such profit corresponds with negative accounting profit. D. will continue to produce because such profit is as high a return as could be earned elsewhere. E. will not continue to produce because it could earn a better return in another industry.arrow_forward
- Suppose a perfectly competitive firm is breaking even (profit is equal to zero). In the short run, the firm should ________. In the long run it should ________. a.shut down; expand b.produce where MC = MR; keep the same production level c.shut down; exit the industry d.produce where MC = MR; leave the industryarrow_forwardThe following graph summarizes the demand and costs for a firm that operates in a perfectly competitive market. a. What level of output should this firm produce in the short run? b. What price should this firm charge in the short run? c. What is the firm’s total cost at this level of output? d. What is the firm’s total variable cost at this level of output? e. What is the firm’s fixed cost at this level of output? f. What is the firm’s profit if it produces this level of output? g. What is the firm’s profit if it shuts down? h. In the long run, should this firm continue to operate or shut DOWNarrow_forwardWhat are the explanations to these?arrow_forward
- Assume that apples are produced in a perfectly competitive market. Columbia’s Orchard is a typical firm that grows and sells apples. Currently, Columbia earns zero economic profit, and the market price of apples is $10 per basket. b. Suppose an increase in the popularity of apple, the demand for apple increases. How will the increase in the demand for apples affect Columbia’s economic profit in the short run? Explain. Answer: c. What will happen to Columbia’s economic profit in the long run? Explain.arrow_forwardPrice 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?arrow_forwardSuppose a firm shuts down in the short run. Which of the following statements can you infer from the fact that the firm shuts down in the short run? a.The firm's losses are equal to its fixed costs. b.The firm would reopen in the long run. c.The firm's economic profits are zero. d.The firm's fixed costs are greater than its variable costs.arrow_forward
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