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 3.4P
(a)
To determine
Complete the table.
(b)
To determine
The profit and the quantity supplied.
(c)
To determine
The market quantity supply.
(d)
To determine
Fill in the blanks.
(e)
To determine
Fill in the blanks.
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The following problem traces the relationship between firm decisions, market supply, and market equilibrium in a perfectly competitive market. a. Complete the following table for a single firm in the short run.
Using the information in the table, fill in the following supply schedule for this individual firm under perfect competition and indicate profit (positive or negative) at each output level. (Hint: At each hypothetical price, what is the MR of producing 1 more unit of output? Combine this with the MC of another unit to figure out the quantity supplied.)
Assume that a firm in a competitive market faces the following cost information. If the market price for this firm's product is $40, calculate the profit maximizing level of output for this firm using marginal analysis. It may help to create your own cost table and fill in columns for Marginal Cost and Average Total Cost based on the Total Cost information below.
a.What is the level of profit for this firm at the profit maximizing output?
b.To convince yourself that the quantity you found is indeed the profit maximizing quantity, try calculating what the profit would be at the next higher level of output. What did you find?
c. What do you predict will happen in this market over the long run?
The wheat industry is comprised of many firms producing an identical product. Market demand and supply conditions are indicated in the left-hand panel of the figure attached; the long-run cost curves of a wheat farmer are shown in the right-hand panel. Currently, the market price for wheat is $2 per pound, and at that price, consumers are purchasing 800,000 pounds of wheat per day.
Using the graphs attached, answer the following:
a. How many pounds of wheat will each farmer produce if they want to maximize profits?
b. How many farmers are currently serving the industry (fractional numbers are fine)?
c. In the long run, what will the equilibrium price of wheat be? Briefly explain your answer.
Chapter 9 Solutions
Principles of Economics (12th Edition)
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