Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 22, Problem 16CQ
(a)
To determine
Filling of table with marginal cost,
(b)
To determine
Lowest
(c)
To determine
The output produced by firm A at the lowest price.
(d)
To determine
Lowest price at which firm A will produce.
(e)
To determine
The output produced by firm B at the lowest price.
(f)
To determine
Production of firm A when the market price is $20.
(g)
To determine
Production of firm B when the market price is $20.
(h)
To determine
Firm achieves higher profit or smaller loss in the case of fixing a $20 as price, when its fixed cost is $20.
(i)
To determine
Net
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Students have asked these similar questions
Assume that a firm in a competitive market faces the following cost information. If the market price for this firm's product is $40, calculate the profit maximizing level of output for this firm using marginal analysis.
a.Approximately where do you think the price will end up in this market over the long run?
b.Last, instead of assuming a given price, how would you go about finding the equilibrium price if you were given information on market demand?
Assume that a firm in a competitive market faces the following cost information. If the market price for this firm's product is $40, calculate the profit maximizing level of output for this firm using marginal analysis. It may help to create your own cost table and fill in columns for Marginal Cost and Average Total Cost based on the Total Cost information below.
a.What is the level of profit for this firm at the profit maximizing output?
b.To convince yourself that the quantity you found is indeed the profit maximizing quantity, try calculating what the profit would be at the next higher level of output. What did you find?
c. What do you predict will happen in this market over the long run?
The wheat industry is comprised of many firms producing an identical product. Market demand and supply conditions are indicated in the left-hand panel of the figure attached; the long-run cost curves of a wheat farmer are shown in the right-hand panel. Currently, the market price for wheat is $2 per pound, and at that price, consumers are purchasing 800,000 pounds of wheat per day.
Using the graphs attached, answer the following:
a. How many pounds of wheat will each farmer produce if they want to maximize profits?
b. How many farmers are currently serving the industry (fractional numbers are fine)?
c. In the long run, what will the equilibrium price of wheat be? Briefly explain your answer.
Chapter 22 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- Suppose the market for peaches is perfectly competitive. The short-run average total cost and marginal cost of growing peaches for an individual grower are illustrated in the figure to the right. Assume that the market price for peaches is $28.00 per box. What is the profit-maximizing quantity for peach growers to produce? boxes. (Enter your response as an integer.) Price (dollars per box) 40- 36- 32- 28- 24- 20- 16- 12- 8- 4- 0 10 20 30 40 50 60 70 80 Output (boxes of peaches per day) MC ATC 90 100 oo Qarrow_forwardConsider the competitive market for steel. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. (?) 100 90 80 70 60 50 40 ATC 30 20 MCO AVC 10 + 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of tons) The following diagram shows the market demand for steel. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 20 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 30 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 40 firms. 100 90 Supply (20 firms) 80 70 E 60 Supply (30…arrow_forwardThe market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently incurring economic losses. How does the price of fertilizer compare to the average total cost, the average variable cost, and the marginal cost of producing fertilizer? Draw two graphs, side by side, illustrating the present situation for the typical firm and for the market. (use MC, ACT, and AVC) Assuming there is no change in either demand or the firms’ cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied by each firm, and the total quantity supplied to the market.arrow_forward
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- Consider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. For each price in the following table, use the graph to determine the number of shirts this firm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero shirts and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price.arrow_forwardSuppose the market for peaches is perfectly competitive. The short-run average total cost and marginal cost of growing peaches for an individual grower are illustrated in the figure to the right. Assume that the market price for peaches is $30.00 per box. What is the profit-maximizing quantity for peach growers to produce? boxes. (Enter your response as an integer.) At this level of output, profit will be $. (Enter your response rounded to the nearest dollar.) Peach growers will earn positive economic profit in the short run at any market price above $ per box. (Enter your response rounded to one decimal place.) Price (dollars per box) 40- 36- 32- 28- 24 20 16- 12- 8 4- 10 MC 20 30 40 50 60 70 80 Output (boxes of peaches per day) ▬▬ ATC 90 100 Qarrow_forwardThe graph illustrates the marginal costs of a thermometer producer facing a constant selling price of $1.00 per thermometer. Suppose that to produce the level of output suggested by using marginal thinking analysis the thermometer producer incurs fixed costs of $20 and variable costs of $172. Would the producer maximize profits by producing at this level? a. Yes. Producers should always use "marginal thinking." b. Yes. Because revenues just cover total costs, the firm is breaking even. c. Yes. Because revenues exceed variable costs, the firm should produce at that level. d. No. Because revenues do not cover total costs, the firm should cease production. e. No. Because revenues do not cover variable costs, the firm should cease production. The graph illustrates the marginal costs of a thermometer producer facing a constant selling price of $1.00 per thermometer. 1.00 Marginal Cost Price Cost and Price ($) .50 60 100 120 Quantity of Thermometers Suppose that to produce the level of…arrow_forward
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