Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
8th Edition
ISBN: 9781337607735
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 14, Problem 3CQQ
To determine
The cost curves effects on short run supply curve.
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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?
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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.
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?
If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will
A. keep producing in the short run but exit the market in the long run.
B. shut down in the short run but return to production in the long run
C. shut down in the short run and exit the market in the long run.
D. keep producing both in the short run and in the long run.
Chapter 14 Solutions
Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
Ch. 14.1 - Prob. 1QQCh. 14.2 - How does a competitive firm determine its...Ch. 14.3 - Prob. 3QQCh. 14 - Prob. 1CQQCh. 14 - Prob. 2CQQCh. 14 - Prob. 3CQQCh. 14 - Prob. 4CQQCh. 14 - Prob. 5CQQCh. 14 - Prob. 6CQQCh. 14 - Prob. 1QR
Ch. 14 - Prob. 2QRCh. 14 - Prob. 3QRCh. 14 - Prob. 4QRCh. 14 - Prob. 5QRCh. 14 - Prob. 6QRCh. 14 - Prob. 7QRCh. 14 - Prob. 8QRCh. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Prob. 3PACh. 14 - Prob. 4PACh. 14 - Prob. 5PACh. 14 - A firm in a competitive market receives 500 in...Ch. 14 - Prob. 7PACh. 14 - Prob. 8PACh. 14 - Prob. 9PACh. 14 - Prob. 10PACh. 14 - Suppose that each firm in a competitive industry...
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Similar questions
- a. Draw the marginal cost and average total cost curves for a typical firm. Explain why the curves have the shapes that they do and why they cross where they do. b. Does a competitive firm’s price equal its marginal cost in the short run, in the long run, or both? Explain.arrow_forwardI. A company produces at an output level where marginal cost is equal to marginal revenue and has the following revenue and cost levels: Total revenue = $1,450 Total cost = $1,500 Total variable cost = $1,300 What would you suggest? a. Shut down. b. Continue to produce because the loss is less than the total fixed cost. c. Increase production to lower the marginal cost. e. Raise the price. II. At current long-run production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. If the market is perfectly competitive, the firm should a. cut back on production. b. stop production all together. c. produce more. d. continue producing at current levels.arrow_forwardJustin’s Jeans sells in a perfectly competitive market with a downward-sloping demand curve and an upward-sloping supply curve. The market price is $33 per unit, and the total fixed cost is $30.(a) Identify the profit-maximizing quantity. Explain using marginal analysis. (b) Calculate the economic profit at the profit-maximizing quantity you identified in part (a). Show your work.(c) Calculate the average fixed cost of producing 6 units. Show your work.(d) Based on your answer to part (b), will the number of firms in the industry increase, decrease, or stay the same in the long run? Explain.(e) Based on your answer to part (b), will the market price increase, decrease, or stay the same in the long run? Explain.(f) The income elasticity of demand for Good M is 1.4, and the cross-price elasticity of demand for jeans with respect to the price of Good M is −0.75. Based on your answer to part (e), what will happen to the demand for jeans? Explain.(g) Now assume that the market in which…arrow_forward
- The apple market is perfectly competitive and is in long-run equilibrium. Now a disease kills 50 per cent of the apple orchards. In the short run, the price of a bag of apples ________ and the remaining apple growers make ________ economic profit. In the long run, the ________. Select one: A. increases; zero; price of apples will return to its original level B. increases; zero; orchards will be replanted and economic profit will return to zero C. increases; positive; orchards will be replanted and economic profit will return to zero D. remains the same; zero; orchards will be replanted and growers will make normal profitsarrow_forwardProvide an explanation to the following statements about perfect competition. (a) Firms are price takers. (b) Firms will enter the marker ifp > AT C. (c) Firms will exit the marker ifp < AT C. (d) Firms break-even in the long-run. (e)P= MinLRAT Cin the long-run. (f) The resource allocation is efficient.arrow_forwardOne more question is, A profit maximizing firm faces market price of p2. What are their profits?arrow_forward
- In the long-run equilibrium in a perfectly competitive market,: a . the firms make an economic profit . b. the firms' owners make a normal profit . C. the average total cost is maximized . d . marginal cost is at a minimum .arrow_forwardTomato Farms is selling tomatoes in a purely competitive market. Its output is 25,000 bushels, which sell for $30 a bushel. At this level of output, the marginal cost is $30 a bushel, average variable cost is $30.50 a bushel, and average total cost is $34.50 a bushel. (a) What is the firm’s total fixed cost? You must show your work.arrow_forwardAssume Robbie's Robots operates in a perfectly competitive market producing 3,000 robots per day. At this output level, the selling price is $ 800 per robot and the marginal cost is $ 625 per robot. It follows that producing one more robot will: cause this firm's Select one .a. profits to remain unchanged . b. profits to increase . c. profits to decrease d. total cost to decreasearrow_forward
- Consider 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_forwardA perfectly competitive firm will be interested in producing a positive output only when the price of its product exceeds its ______. a. AFCmin b. AVCmin c.MCmin d.ATCminarrow_forwardCost MC Select one: ATC AVC ABC D Quantity C in the figure above represents the output level where the firm Quantity a. maximizes profits in the short-run. b. minimizes total costs in the short-run. C. maximizes profits in the long-run. d. minimizes marginal costs in the long-run. e. None of the above.arrow_forward
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