a)
Shut down point in the short run.
a)
Answer to Problem 1CYU
Point F is the shutdown point. The firm shut down immediately when the marginal cost curve cuts the
Explanation of Solution
A firm will continuously produce when the marginal cost is less than the average variable cost but firmly stop its production when the marginal cost equates average variable.
Introduction:
In the short run, the average variable cost curve and the
b)
The firm operates in the short run despite sustaining a loss.
b)
Answer to Problem 1CYU
Point A where the firm operates in the short run despite sustaining a loss.
Explanation of Solution
At the Y output level, the firm sustains in the market despite the loss and at this level, marginal cost is higher than the average variable cost and price is less than the average variable cost.
Introduction:
In the short run, the average variable cost curve and the average total cost will be U-shaped whereas the marginal cost curve would be swoosh shaped. The average total cost curve would be above the average variable cost. The marginal cost curve cuts the average total cost at its minimum level.
c)
The firm operates while making a profit.
c)
Answer to Problem 1CYU
Point B is where the firm operates while making a profit.
Explanation of Solution
Firms earn profit where marginal cost is less than average variable cost. At this level, marginal cost is rising but the average cost curve is decreasing.
Introduction:
In the short run, the average variable cost curve and the average total cost will be U-shaped whereas the marginal cost curve would be swoosh shaped. The average total cost curve would be above the average variable cost. The marginal cost curve cuts the average total cost at its minimum level.
Want to see more full solutions like this?
Chapter 59 Solutions
Krugman's Economics For The Ap® Course
- How did Jennifer Lopez use free enterprise to become successful ?arrow_forwardAn actuary analyzes a company’s annual personal auto claims, M and annual commercialauto claims, N . The analysis reveals that V ar(M ) = 1600, V ar(N ) = 900, and thecorrelation between M and N is ρ = 0.64. Compute V ar(M + N ).arrow_forwardDon't used hand raitingarrow_forward
- Answer in step by step with explanation. Don't use Ai.arrow_forwardUse the figure below to answer the following question. Let I represent Income when healthy, let I represent income when ill. Let E [I] represent expected income for a given probability (p) of falling ill. Utility у в ULI income Is есте IM The actuarially fair & partial contract is represented by Point X × OB A Yarrow_forwardSuppose that there is a 25% chance Riju is injured and earns $180,000, and a 75% chance she stays healthy and will earn $900,000. Suppose further that her utility function is the following: U = (Income) ³. Riju's utility if she earns $180,000 is _ and her utility if she earns $900,000 is. X 56.46; 169.38 56.46; 96.55 96.55; 56.46 40.00; 200.00 169.38; 56.46arrow_forward
- Use the figure below to answer the following question. Let là represent Income when healthy, let Is represent income when ill. Let E[I], represent expected income for a given probability (p) of falling ill. Utility & B естве IH S Point D represents ☑ actuarially fair & full contract actuarially fair & partial contract O actuarially unfair & full contract uninsurance incomearrow_forwardSuppose that there is a 25% chance Riju is injured and earns $180,000, and a 75% chance she stays healthy and will earn $900,000. Suppose further that her utility function is the following: U = (Income). Riju is risk. She will prefer (given the same expected income). averse; no insurance to actuarially fair and full insurance lover; actuarially fair and full insurance to no insurance averse; actuarially fair and full insurance to no insurance neutral; he will be indifferent between actuarially fair and full insurance to no insurance lover; no insurance to actuarially fair and full insurancearrow_forward19. (20 points in total) Suppose that the market demand curve is p = 80 - 8Qd, where p is the price per unit and Qd is the number of units demanded per week, and the market supply curve is p = 5+7Qs, where Q5 is the quantity supplied per week. a. b. C. d. e. Calculate the equilibrium price and quantity for a competitive market in which there is no market failure. Draw a diagram that includes the demand and supply curves, the values of the vertical- axis intercepts, and the competitive equilibrium quantity and price. Label the curves, axes and areas. Calculate both the marginal willingness to pay and the total willingness to pay for the equilibrium quantity. Calculate both the marginal cost of the equilibrium quantity and variable cost of producing the equilibrium quantity. Calculate the total surplus. How is the value of total surplus related to your calculations in parts c and d?arrow_forward
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