Identify why a firm that incurs losses choose to produce rather than shut down.

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Answer 1

Question

Chapter 8, Problem 1RQ

To determine

Identify why a firm that incurs losses choose to produce rather than shut down.

Expert Solution & Answer

Explanation of Solution

The economic loss is a situation that occurs when the total revenue of the firm is less than the total cost of the firm. However, the firms will be ready to accept the losses rather than shut down in the short run. This is because the total cost is the sum total of variable cost and the fixed cost. In the short run, if the total revenue is greater than the variable cost and less than the total cost of the firm, then the losses incurred by the firm would be minimized. Thus, even though the firm faces loss in the short run, it would operate rather than shut down the production.

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5. We learnt the following equation in the class: Ak = sy - (n + 8)k where y = ko. Now, I transform this equation into: Ak/k = sy/k - (n + 8). I want you to use a diagram to show the steady state solution of this equation (In the diagram, there will be two curves - one represents sy/k and one represents (n + 8). In the steady state, of course, Ak/k = 0). In this diagram, the x-axis is k. What will happen to this diagram if the value of n increases?

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3. A country has the following production function: Y = K0.2L0.6p0.2 where Y is total output, K is capital stock, L is population size and P is land size. The depreciation rate (8) is 0.05. The population growth rate (n) is 0. We define: y = ½, k = 1 and p = . Land size is fixed. L a) Find out the steady state values of k and y in terms of p, the per capita land size.

Answer 2

Question

Chapter 8, Problem 1RQ

To determine

Identify why a firm that incurs losses choose to produce rather than shut down.

Expert Solution & Answer

Explanation of Solution

The economic loss is a situation that occurs when the total revenue of the firm is less than the total cost of the firm. However, the firms will be ready to accept the losses rather than shut down in the short run. This is because the total cost is the sum total of variable cost and the fixed cost. In the short run, if the total revenue is greater than the variable cost and less than the total cost of the firm, then the losses incurred by the firm would be minimized. Thus, even though the firm faces loss in the short run, it would operate rather than shut down the production.

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Answer 3

Question

Chapter 8, Problem 1RQ

To determine

Identify why a firm that incurs losses choose to produce rather than shut down.

Expert Solution & Answer

Explanation of Solution

The economic loss is a situation that occurs when the total revenue of the firm is less than the total cost of the firm. However, the firms will be ready to accept the losses rather than shut down in the short run. This is because the total cost is the sum total of variable cost and the fixed cost. In the short run, if the total revenue is greater than the variable cost and less than the total cost of the firm, then the losses incurred by the firm would be minimized. Thus, even though the firm faces loss in the short run, it would operate rather than shut down the production.

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Answer 4

Question

Chapter 8, Problem 1RQ

To determine

Identify why a firm that incurs losses choose to produce rather than shut down.

Expert Solution & Answer

Explanation of Solution

The economic loss is a situation that occurs when the total revenue of the firm is less than the total cost of the firm. However, the firms will be ready to accept the losses rather than shut down in the short run. This is because the total cost is the sum total of variable cost and the fixed cost. In the short run, if the total revenue is greater than the variable cost and less than the total cost of the firm, then the losses incurred by the firm would be minimized. Thus, even though the firm faces loss in the short run, it would operate rather than shut down the production.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 8, Problem 1RQ

To determine

Identify why a firm that incurs losses choose to produce rather than shut down.

Expert Solution & Answer

Explanation of Solution

The economic loss is a situation that occurs when the total revenue of the firm is less than the total cost of the firm. However, the firms will be ready to accept the losses rather than shut down in the short run. This is because the total cost is the sum total of variable cost and the fixed cost. In the short run, if the total revenue is greater than the variable cost and less than the total cost of the firm, then the losses incurred by the firm would be minimized. Thus, even though the firm faces loss in the short run, it would operate rather than shut down the production.

Answer 6

Chapter 8, Problem 1RQ

To determine

Identify why a firm that incurs losses choose to produce rather than shut down.

Expert Solution & Answer

Explanation of Solution

The economic loss is a situation that occurs when the total revenue of the firm is less than the total cost of the firm. However, the firms will be ready to accept the losses rather than shut down in the short run. This is because the total cost is the sum total of variable cost and the fixed cost. In the short run, if the total revenue is greater than the variable cost and less than the total cost of the firm, then the losses incurred by the firm would be minimized. Thus, even though the firm faces loss in the short run, it would operate rather than shut down the production.

Answer 7

Chapter 8, Problem 1RQ

To determine

Identify why a firm that incurs losses choose to produce rather than shut down.

Answer 8

Expert Solution & Answer

Explanation of Solution

The economic loss is a situation that occurs when the total revenue of the firm is less than the total cost of the firm. However, the firms will be ready to accept the losses rather than shut down in the short run. This is because the total cost is the sum total of variable cost and the fixed cost. In the short run, if the total revenue is greater than the variable cost and less than the total cost of the firm, then the losses incurred by the firm would be minimized. Thus, even though the firm faces loss in the short run, it would operate rather than shut down the production.