EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Chapter 9, Problem 13SP
To determine
The profit-maximizing level of output.
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Students have asked these similar questions
a) suppose in the short run the amount of machines she has is fixed at 27. How many mixers should she use? How many baklavas will she produce? How much profit will she make?
b) using an isoprofit line, as well as the production function, draw a diagram of your solution from a). Carefully label all the slopes and intercepts.
c) In the long run, how many mixers should she use? How many machines? How many baklavas will she make?
Why should a firm shut down if its average variable cost curve is above the price of their product?
Refer to the figure below. If the firm is producing the level of output that
maximizes profit, its total variable cost of production is:
Chapter 9 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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- As a firm increases its output, we expect marginal cost to Increase. Decrease. Remain the same. Impossible to predict.arrow_forwardTC=q^2+3q+1arrow_forwardSection 2: Long Answer 1. A firm has technology described by q = KL. Set out the firm's long-run cost minimization problem and find the first order conditions for a cost minimizing input choice. Briefly describe the economic interpretation of each condition.arrow_forward
- Each graph illustrates three short-run cost curves for firms, where ATC is average total cost (also referred to as average cost), MC is marginal cost, and AVC is average variable cost. Please classify each of the graphs as valid or invalid based on what you know about the relationships between these curves.arrow_forwardKristin runs a rare book store. Last year, she earned $35,000 in revenue and had explicit costs of $8,000. Kristin could have made $29,750 working for a security company and received an additional $5,000 if she had used the company's inputs in a different way. Calculate Kristin's economic profit. $arrow_forwardLet's consider a company that produces a good Z, in a perfectly competitive market. The expression for the total cost of this undertaking is as follows: C( q) = 72 + 2q2 Graph the marginal cost, average cost, and average variable cost curves of this company. Your chart should be accurate. Also include the break - even point (SR) and closing point (SF).arrow_forward
- In the long run, you are given the following: The total revenue curve is TR= -4Q^2 + 28Q +235. The average variable cost curve is AVC = 4Q-36+(100/Q). At what level of output should the firm operate in order to maximize profits?arrow_forwardThe graph below shows a particular firms marginal revenue (mr) marginal cost (mc) and average total cost (atc) curves, where the market is competitive. Suppose that a new management team is brought in and that this team is initially less concerned about maximizing profits than it is simply about making a profit. What range of production quantities will allow the firm to operate while earning a profit? Give you're answer by dragging the qmin to Qmax lines into their correct positions. The output will need to lie somewhere between those limits.arrow_forwardA firm currently produces 500 units at a price of $40. If it earns $1,500 profit, what must the average cost be? Note: The formula for Profit = Quantity X (Price - Average Cost) Provide your answer below:arrow_forward
- The following are the cost information of a typical ice tea company in an industry with 100 firms. Output (ice tea per hour) Marginal Cost ($ per ice tea) Average Variable Cost ($ per ice tea) Average Total Cost ($ per ice tea) 3 2.50 4.00 7.33 4 2.20 3.53 6.03 5 1.90 3.24 5.24 6 2.00 3.00 4.67 7 2.91 2.91 4.34 8 4.25 3.00 4.25 9 8.00 3.33 4.44 d) Is the price $8 a short-run or long-run equilibrium price for the industry? If the price is not a long run equilibrium price, what adjustments are likely to happen in the market for it to reach long run equilibrium. e) What price must prevail in the market for a typical firm to operate in the short run? At this price, how many ice tea will be supplied by all firms in the market?arrow_forwardThe following are the cost information of a typical ice tea company in an industry with 100 firms. Output (ice tea per hour) Marginal Cost ($ per ice tea) Average Variable Cost ($ per ice tea) Average Total Cost ($ per ice tea) 3 2.50 4.00 7.33 4 2.20 3.53 6.03 5 1.90 3.24 5.24 6 2.00 3.00 4.67 7 2.91 2.91 4.34 8 4.25 3.00 4.25 9 8.00 3.33 4.44 a) At the price of $2.20 per ice tea, what is the firm’s profit maximizing level of output? Why is this the profit maximizing level of output for the firm? b) If the market price is $8 per ice tea and the firm is producing six (6) ice tea per hour, is the firm maximizing profit or not? Why or why not? If the firm is not maximizing profit, what should it do to maximize profit? c) At the price of $8 per ice tea, what is the firm’s profit-maximizing level of output? Why is this the profit maximizing level of output? What is the firm’s economic profit at…arrow_forwardWhich of the costs discussed in the chapter is the most important when a firm is deciding how much to produce? Costs that are spent to improve the image of the firm. A firm will choose to increase output if it spends a large amount on advertising and brand image. Fixed costs because these costs are spent and cannot be changed in the time period under consideration. If fixed costs are higher, the firm will choose to produce more output. Variable costs because these costs change as output changes. If the firm wants to maximize profits, it will choose to produce a quantity where variable costs are minimized. Marginal cost because this cost shows the additional cost associated with producing one more unit of output. Firms will use this information to decide to produce more or less output.arrow_forward
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