Microeconomics
11th Edition
ISBN: 9781260507041
Author: Colander, David
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Question
Chapter 14.A, Problem 1QE
a)
To determine
The profit-maximizing level of price and output.
b)
To determine
The profit-maximizing level of output and price of a
c)
To determine
Comparison between the results obtained in part (a) and part (b).
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
TRUE OR FALSE?
A decreasing cost industry has a long run supply curve that is upward sloping.
Good Grapes is selling grapes in a purely competitive market. Its output is 5,000 pounds, which it sells for $5 a pound. At the 5,000-pound level of output, the average variable cost is $4.00, the marginal cost is $4.25, and the average total cost is $4.50 a pound. Should the firm increase output, decrease output, or not produce? Why? How should the firm determine the optimal level of output?
Consider a typical firm in a perfectly competitive industry. The firm has a total cost function of TC = 100 + 4q^2 (and thus MC= 8q). If the current market price is 50 then:
a. The firm will not shutdown in the short run but will leave the industry in the long run.
b. The firm will shutdown in the short run and will leave the industry in the long run.
c. The firm will not shutdown in the short run and will stay in the industry in the long run.* **
d. The firm will shutdown in the short run but will stay in the industry in the long run.
e. None of the above.
Why is the answer C? Please provide explanation of shut down points in the short run and long run with AVC, ATC, etc.
Chapter 14 Solutions
Microeconomics
Ch. 14.1 - Prob. 1QCh. 14.1 - Prob. 2QCh. 14.1 - Prob. 3QCh. 14.1 - Prob. 4QCh. 14.1 - Prob. 5QCh. 14.1 - Prob. 6QCh. 14.1 - Prob. 7QCh. 14.1 - Prob. 8QCh. 14.1 - Prob. 9QCh. 14.1 - Prob. 10Q
Ch. 14.A - Prob. 1QECh. 14.A - Prob. 2QECh. 14.A - Prob. 3QECh. 14.A - Prob. 4QECh. 14 - Prob. 1QECh. 14 - Prob. 2QECh. 14 - Prob. 3QECh. 14 - Prob. 4QECh. 14 - Prob. 5QECh. 14 - Prob. 6QECh. 14 - Prob. 7QECh. 14 - Prob. 8QECh. 14 - Prob. 9QECh. 14 - Prob. 10QECh. 14 - Prob. 11QECh. 14 - Prob. 12QECh. 14 - Prob. 13QECh. 14 - Prob. 14QECh. 14 - Prob. 15QECh. 14 - Prob. 16QECh. 14 - Prob. 17QECh. 14 - Prob. 18QECh. 14 - Prob. 19QECh. 14 - Prob. 20QECh. 14 - Prob. 21QECh. 14 - Prob. 22QECh. 14 - Prob. 23QECh. 14 - Prob. 24QECh. 14 - Prob. 25QECh. 14 - Prob. 1QAPCh. 14 - Prob. 2QAPCh. 14 - Prob. 3QAPCh. 14 - Prob. 4QAPCh. 14 - Prob. 5QAPCh. 14 - Prob. 6QAPCh. 14 - Prob. 7QAPCh. 14 - Prob. 1IPCh. 14 - Prob. 2IPCh. 14 - Prob. 3IPCh. 14 - Prob. 4IPCh. 14 - Prob. 5IPCh. 14 - Prob. 6IPCh. 14 - Prob. 7IPCh. 14 - Prob. 8IPCh. 14 - Prob. 9IP
Knowledge Booster
Similar questions
- The canola farming industry is perfectly competitive. Assume that it is in long-run equilibrium at quantity Q0 and price P0. Assume also that it is a constant-cost industry. a) Draw a supply and demand diagram for the canola market showing this equilibrium b.) draw diagram for a typical canola growing farm in its initial long run equilibrium, showing its Marginal Cost, Average Total Cost, and Long Run Average Cost curves. Are there any profits being made by this firm?arrow_forwardThe data in the table to the right give the total cost, C, and marginal cost, MC, for a profit maximizing firm in a perfectly industry market at each possible level of output, q. (Enter all numeric responses using integers.) What is marginal revenue when the market price is $46? MR = $46. What is marginal revenue when market price is $40? MR = $ 40 What happens to the firm's output choice and profit if the price of the product falls from $46 to $40. If the market price falls from $46 to $40, then the firm's output will from units to units. 06 q 1 23 456 7 9 10 11 C 100 150 178 198 212 230 250 272 310 355 410 475 MC 50 28 20 14 18 20 22 38 45 55 65arrow_forwardThe information below applies to a competitive firm that sells its output for $45 per unit. When the firm produces and sells 100 units of output, its average total cost is $24.5.When the firm produces and sells 101 units of output, its average total cost is $24.65. Suppose the firm is currently producing and selling 100 units of output. Should the firm increase its output to 101 units? a. Yes, because the marginal revenue exceeds the marginal cost. b. Yes, because the marginal revenue exceeds the average total cost c. No, because the marginal cost exceeds the marginal revenue. d. No, because the average total cost exceeds the marginal revenue.arrow_forward
- in a perfectly competitive market with a constant cost industry, there are currently 100 identical firms, each with the total cost function TC(Q) = Q^2 + 4Q + 36. The market demand is Q = 1800 – 50p. a. What is the price at the short-run equilibrium? What is the net profit/loss of each firm at this price? b. In the long run, how many firms will enter into /exit from the market?arrow_forwardIn a competitive market characterized by increasing costs, the long-run industry supply curve gives the minimum long-run average cost of production at various levels of industry output. long-run industry supply curve gives the long-run marginal cost of production at various levels of industry output. long-run industry supply curve is upward sloping. both a and b all of the abovearrow_forwardIn a competitive market, the industry demand and supply curves are P = 70-QD and P = 40+2QS. w. Find the market equilibrium price and output.arrow_forward
- Refer to the figure above. When the demand curve is given by P2 = $15, this firm should ______ A. continue to operate in the short run and think about shutting down in the long run B. discontinue operation in the short run since there is a loss when operating. C. keep operating as long as loss is not greater than total cost D. discontinue operation in the short run since average total cost is greater than price. When the demand is P3 = $10, this firm should ______ A. continue to operate in the short run and think about shutting down in the long run B. discontinue operation in the short run since the firm is unable to cover variable costs. C. keep operating as long as loss is not greater than total cost D. discontinue operation in the short run since average total cost is greater than price.arrow_forwardQuantity Fixed Cost Variable Cost Total Cost Marginal Cost 10 200 50 250 0 20 200 100 300 5 30 200 300 500 20 40 200 800 1000 X Based on the table above for a perfectly competitive firm: A) Find the marginal cost as X B) If the equilibrium price is $20, find the profit maximizing quantity. C) How much profit will the firm earn?arrow_forwardA perfectly competitive firm faces the short-run cost schedule shown in Table 1. A) Calculate average total cost (ATC=TC/Q), marginal cost (MC=∆TC/∆Q) and marginal revenue (MR=∆TR/∆Q) for each level of output. The price per unit of output is £16. B) Plot ATC, MC and MR on a graph and mark the profit-maximising output. At what output is profit maximised? C) How much profit/loss is made at the optimum level of output?arrow_forward
- The figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves. Based on this figure, which of the following statements are correct? 8,000 Price, Marginal cost ($) 0 E Quantity of cars, Q At A, the firm makes positive profits. The firm makes the same profit at B and D. O Profit margin is the same at B and D. O The slope of the isoprofit is zero at D. MC Isoprofit A Isoprofit B AC 100arrow_forwardIf a firm's total revenue is $100, it's total cost is $130, and its total fixed cost is $40. Should the firm stay in business? Explain. How does a firm in perfect competition determine its outputs to produce? Why will the firm not produce this level of output? Explain.arrow_forwardThe graph to the right depicts the average cost curves and the marginal cost curve for a typical firm in a perfectly competitive industry. 1.) Using the line drawing tool, draw the firm's demand curve at a market price such that the firm is breaking even. Label your curve 'd₁'. 2.) Using the line drawing tool, draw the firm's demand curve at a market price such that the firm is at its shutdown price. Label your curve 'd₂'. Note: if you are not prompted for a label, you have used the wrong drawing tool. Price, ATC, MC ($) 100- 90- 80- 70- 60- 50- 40- 30- 20- 10- 0- MC Quantity (per month) ATC AVCarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education