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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Question
Chapter 9, Problem 1.4P
To determine
The total revenue and total cost.
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You are given the following cost data:The total fixed costs are $100.(Photo)If the price of output is $15, how many units of output will this firm produce? What is total revenue? What is total cost? Briefly explain using the concept of marginal cost. What do you think the firm is likely to do in the short run? In the long run?
Select one:a. Profit maximizing Quantity=3b. Profit maximizing Quantity=1c. Profit maximizing Quantity=0d. Profit maximizing Quantity=6
Notes for graph: MC is marginal cost, MR is marginal revenue, ATC is average total cost, AVC is average variable cost and D is the demand curve.
To maximize the profit, how many units should the firm produce? At what price?
Based on your answer, what is the total revenue? Total costs? Total profit? Total fixed cost?
Will you operate this firm in the short run? Long run? Briefly explain.
-Briefly discuss average costs, including how they are calculated, how they are typically appear on a graph, and what they relate to profitability.
-Briefly explain what is meant by the term "fixed costs" and provide three examples of same. What determines a firm's level of fixed costs?
-Briefly explain what is meant by the term "variable costs" and provide three examples of same.
-Briefly explain how the total revenue for a profit-seeking firm is determined.
Chapter 9 Solutions
Principles of Economics (12th Edition)
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- 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 Price and cost 18 15 14 13 12 10 19/21 SUBMIT ANSWER 13 OF 21 QUESTIONS C OMPLETED 28 MacBook Pro 금□ F7 F8 F9 F1o F2 F3 F5arrow_forward9:20 Today Вack Edit 9:18 PM 9. You are given the following cost data: TFC TVC 12 1 12 5 12 9. 3 12 14 4 12 20 12 28 12 38 If the price of output is $7, how many units of output will this firm produce? What is the total revenue? What is the total cost? Will the firm operate or shut down in the short run? in the long run? Briefly explain your answers.arrow_forwardThe graph shows the cost curves for a perfectly competitive firm. If the market price of the product is $1.25 per unit, then the firm will earn how much profit per unit in the short run?arrow_forward
- Related to the Economics in Practice on page 195: If firms have long-run average cost curves with a long, flat section, larger firms have a cost advantage over smaller firms. the optimal number of firms in the industry is one. their long run supply curves are downward sloping. it is impossible to predict the size of the firm.arrow_forwardHi. I'm a little confused on how the short run supply curve of a price taking firm is determined. Do i use the marginal costs and the average variable cost curves and use the diagram for that to find the short run supply curvearrow_forwardritaj.birzeit.edu O Final Exam Question 1: Shown below are the graphs of the firm's marginal cost, average variable cost, and average total cost. COST PER UNIT (Cents per bushel) 100 90 80 70 60 50 40 30 20 10 1 2 3 4 5 6 7 8 9 10 QUANTITY OF OUTPUT (Thousands of bushels) A. On the graph, identify each curve.arrow_forward
- Suppose Larry runs a small business that manufactures shirts. Assume that the market for shirts is a price-taker market, and the market price is $10 per shirt. The following graph shows Larry's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven shirts that Larry produces, including zero shirts. 125 100 TOTAL COST AND REVENUE (Dollars) 25 ☐ Total Cost ☐ -50 0 1 2 3 4 5 6 7 8 QUANTITY (Shirts) Total Revenue A Profit (?) Calculate Larry's marginal revenue and marginal cost for the first seven shirts he produces and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost. 25 2 COSTS AND REVENUE (Dollars per shirt) 0 1 2 3 5 6 7 8 QUANTITY (Shirts) Marginal Revenue Marginal Cost Larry's profit is maximized when he produces is shirts. When he does this, the marginal cost of the previous shirt he…arrow_forwardWhat does it mean to be operating a firm in the "long run?" What does it mean to be operating a firm in the "short run"? What are the practical implications for managing a business if you are in "short run?arrow_forward1.4 You are given the following cost data: TFC 9 0 1 2 3 4 5 5678 6 7 8 25 25 25 25 25 25 25 25 25 TVC 0 7 12 18 25 34 46 62 88 If the price of output is $15, how many units of output will this firm produce? What is the total revenue? What is the total cost? Will the firm operate or shut down in the short run? In the long run? Briefly explain your answers.arrow_forward
- Amos McCoy is currently raising corn on his 100-acre farm and earning an accounting profit of $100 per acre. However, if he raised soybeans, he could earned an accounting profit of $200 per acre. Is he currently earning an economic profit?arrow_forward3. Profit maximization using total cost and total revenue curves Suppose Jayden operates a handicraft pop-up retail shop that sells rompers. Assume a perfectly competitive market structure for rompers with a market price equal to $20 per romper. The following graph shows Jayden's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for rompers for quantities zero through seven (including zero and seven) that Jayden produces. 200 175 150 125 100 TOTAL COST AND REVENUE (Dollars) 75 50 25 25 ח ☐ -25 0 1 2 ☐ ☐ ? Total Revenue Total Cost Profit 5 6 7 8 3 4 QUANTITY (Rompers)arrow_forwardPlease help me to answer Darrow_forward
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