Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 8, Problem 2.5P
(a)
To determine
To complete the table.
(b)
To determine
To graph the average variable cost curve, average total cost, and marginal cost curves.
(c)
To determine
The output and profit produced by the firm in the short run when price is $20.
(d)
To determine
The output and profit produced by the firm in the short run when price is $60.
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USE THE GRAPH TO ANSWER THE FOLLOWING QUESTIONS: (IF REQUIRED, USE THE DISCREET NUMBER OF BARRELS).
ANSWERS IN WHOLE NUMBER
a. How many barrels of natural-organic oil reflect the lowest minimum average variable cost?b. How much is the price of the natural-organic oil per barrel?c. How much is the fixed cost to produce the natural-organic oil?d. How many barrels of natural-organic oil should the firm produce to maximize its profit?e. At what production level would the marginal cost exceed the average cost?
(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…
The graph below shows the marginal cost (MC), average variable cost (AVC), and average total cost (ATC) curves for a firm in a
competitive market. These curves imply a short-run supply curve that has two distinct parts. One part, not shown, lies along the vertical
axis (quantity-0); this represents a condition of production shutdown. Where is the other part? Use the straight-line tool to drawit.
To refer to the graphing tutorial for this question type, please click here
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Chapter 8 Solutions
Principles of Economics (12th Edition)
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