Microeconomics
10th Edition
ISBN: 9781259655500
Author: David C Colander
Publisher: McGraw-Hill Education
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Question
Chapter 13, Problem 9QE
To determine
Graphical representation of
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draw marginal cost, marginal revenue, and average total cost curves for a typical perfectly competitive firm in long-run equilibrium and indicate the profit maximizing level of output and total profit for that firm.
The graph shows the marginal cost (MC), average total cost
(ATC), and marginal revenue (MR) curves for a perfectly (or
purely) competitive firm. Note, for such firms, the demand
(D) curve is the same as the MR curve. Answer two
questions, specifying to at least one decimal place.
How many units should this firm produce to maximize profit?
number of units:
What price will the firm receive for each unit at the profit
maximizing level out output?
$
MC/MR
$12
9.7
5.6
D=MR
MC
ATC
6.6
10.2 12
16
Quantity
At what output does a perfectly competitive firm maximize its profit?
when marginal cost equals average fixed cost
when average total cost equals average revenue
when total revenue equals total variable cost
when marginal cost equals marginal revenue
Chapter 13 Solutions
Microeconomics
Ch. 13.1 - Prob. 1QCh. 13.1 - Prob. 2QCh. 13.1 - Prob. 3QCh. 13.1 - Prob. 4QCh. 13.1 - Prob. 5QCh. 13.1 - Prob. 6QCh. 13.1 - Prob. 7QCh. 13.1 - Prob. 8QCh. 13.1 - Prob. 9QCh. 13.1 - Prob. 10Q
Ch. 13 - Prob. 1QECh. 13 - Prob. 2QECh. 13 - Prob. 3QECh. 13 - Prob. 4QECh. 13 - Prob. 5QECh. 13 - Prob. 6QECh. 13 - Prob. 7QECh. 13 - Prob. 8QECh. 13 - Prob. 9QECh. 13 - Prob. 10QECh. 13 - Prob. 11QECh. 13 - Prob. 12QECh. 13 - Prob. 13QECh. 13 - Prob. 14QECh. 13 - Prob. 15QECh. 13 - Prob. 16QECh. 13 - Prob. 17QECh. 13 - Prob. 18QECh. 13 - Prob. 19QECh. 13 - Prob. 20QECh. 13 - Prob. 1QAPCh. 13 - Prob. 2QAPCh. 13 - Prob. 3QAPCh. 13 - Prob. 4QAPCh. 13 - Prob. 5QAPCh. 13 - Prob. 1IPCh. 13 - Prob. 2IPCh. 13 - Prob. 3IPCh. 13 - Prob. 4IPCh. 13 - Prob. 5IP
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Similar questions
- Assume a competitive firm is operating at short run equilibrium. If their fixed cost drops by 40% should the firm change its output level? Explain your answerarrow_forwardThe graph below gives marginal costs (MC), average variable costs (AVC), and average total costs (ATC) for a firm. Note that marginal revenue (MR) is not shown. Suppose the firm operates in a perfectly competitive market and acts to maximize its profit. which of the following is/are true? I. At a price of 1.5, the firm will shut down in the short-run. II. At a price of 0.5, the firm will shut down in the short-run. III. At a price of 2.5, the firm will make a positive economic profit. 7 MC АТС AVC 3 2 1 1 Quantity 2. 4. Pricearrow_forwardOn a graph for a representative firm in a perfectly competitive industry, depict the three cost curves AVC, ATC, and MC (assume typical U-shaped cost curves). Now assume the market price, P, is such that it intersects the upward-sloping portion of MC above ATC. Graphically depict the short-run equilibrium q (representative firm's output) and π (representative firm's profit) under this price scenario.arrow_forward
- A perfectly competitive firm will choose to shut down when the average total cost intersects the marginal cost curve below the average variable cost curvearrow_forwardA perfectly competitive firm produces the level of output at which MR=MC on the rising portion of the firm’s marginal cost curve. At that output level, it has the following costs and revenues: TC = $830,000 VC = $525,000 TR = $428,000 Given that the firm produces the level of output at which MR=MC, calculate the amount of profit (loss) this firm earns. is it Profit=TR-TC?arrow_forwardThe graph shows the average total cost (ATC) curve, the marginal cost (MC) curve, the average variable cost (AVC) curve, and the marginal revenue (MR) curve (which is also the market price) for a perfectly competitive firm that produces terrible towels. Answer the three accompanying questions, assuming that the firm is profit-maximizing and does not shut down in the short run. What is the firm's total revenue? Price $485 $450 $300 $225 205 260 Quantity 336 365 MC ATC AVC MR Parrow_forward
- Determine a perfectly competitive firm’s profit-maximizing output level and profit in the short run.arrow_forwardWhat is the firm’s corresponding average total cost (ATC) per unit produced?arrow_forwardA firm in a perfectly competitive industry is maximizing its profits at 400 units of output. If the marginal revenue and marginal cost are each $35 and the firm's average total cost is $25, What is this firm's profit?arrow_forward
- A perfectly competitive firm will maximize its profit when marginal revenue is greater than marginal cost. True or False?arrow_forwardA perfectly competitive firm faces the short-run cost schedule shown in Table 1. A) Calculate average total cost (ATC=TC/Q), marginal cost (MC=∆TC/∆Q) and marginal revenue (MR=∆TR/∆Q) for each level of output. The price per unit of output is £16. B) Plot ATC, MC and MR on a graph and mark the profit-maximising output. At what output is profit maximised? C) How much profit/loss is made at the optimum level of output?arrow_forwardAccording to marginal analysis, a perfectly competitive firm will produce an output level where what is true about its Marginal Revenue and its Marginal Cost?arrow_forward
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