Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 7, Problem 4MC
To determine
Economies of scale.
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(1) Use the graph to answer the question below. The quantity is measured in thousands of units.
What will this firm decide to do in the long run?
A-It will stay in the market because the price is above its AVC at its profit-maximizing output.
B-It will leave the market because the price is below its ATC at its profit-maximizing output.
C-It will increase its price to point B to earn normal profit.
D-It will increase its output until its profit-maximizing output level is equal to B.
E-Insufficient data to determine.
(2) A dairy farmer is operating in a perfectly competitive market. The market price for milk is between the farmer's average variable cost and average total cost at the profit-maximizing level of output. What will the farmer do?
A-Produce more milk. B-Produce less milk. C-Shut down in the short run. D-Operate in the short run and leave the industry in the long run. E-Insufficient information to determine
(3) A firm operating in a perfectly competitive market cannot…
Which of the following represents a long-run decision for the firm?
a. rehiring workers who were previously laid off.
b. determining what price to charge for a given level of output.
c. deciding how much output to supply to the market at the current market price.
d. building another wing on the plant in order to add a new assembly line.
answer. (d. building another wing on the plant in order to add a new assembly line.)
Please help me explain this questions. Thanks in advance
Write a paper based on The Theory of the firm, under these two subtitles: 1. Division of labor, 2. Demand and Supply Factors of Production 3. Law of Return to Scale
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Managerial Economics: A Problem Solving Approach
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