Bundle: Microeconomics, 13th + Aplia, 1 Term Printed Access Card
13th Edition
ISBN: 9781337742535
Author: Roger A. Arnold
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 9.2, Problem 3ST
To determine
Explain the two ways of profit maximization.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
A manager makes the statement that output should be expanded as long as average revenue exceeds average cost. Does this strategy make sense? Explain.
Suppose the market for the pain reliever aspirin is in long-run equilibrium at a price of $3 per bottle. New scientific research links aspirin with a reduced risk of heart disease.
In the short run, what will happen to the price of aspirin? Explain using a diagram.
In the short run, how will firms respond to the change in price described in part 1? What will happen to profits? Explain using the same diagram.
Given the situation described in part 2, what can we expect to happen to the number of aspirin producers in the long run? What effect will the change in the number of producers have?
Increasing demand from China has made New Zealand the world's biggest exporter of dairy products . Its exports of milk to China increased by 45 % in 2013. More than 300 000 hectares land in New Zealand have been transferred to dairy use from other forms of farming and forestry use since 2000. The increase in milk production has caused the average cost of its production to fall and changes in production methods have affected the price elasticity of supply of milk . Discuss whether the average cost of production always decreases when a firm increases the total output that it produces(Define economies of scale and diseconomies of scale Use of graph to explain ( if applicable ) Explain the various economies of scale e.g. purchasing economies of scale [ up to 5 ] Explain the various diseconomies of scale [ up to Brief conclusion)
Chapter 9 Solutions
Bundle: Microeconomics, 13th + Aplia, 1 Term Printed Access Card
Ch. 9.1 - Prob. 1STCh. 9.1 - Prob. 2STCh. 9.1 - Prob. 3STCh. 9.1 - Prob. 4STCh. 9.2 - Prob. 1STCh. 9.2 - Prob. 2STCh. 9.2 - Prob. 3STCh. 9.2 - Prob. 4STCh. 9.3 - Prob. 1STCh. 9.3 - Prob. 2ST
Ch. 9.3 - Prob. 3STCh. 9.3 - Prob. 4STCh. 9.4 - Prob. 1STCh. 9.4 - Prob. 2STCh. 9 - Prob. 1QPCh. 9 - Prob. 2QPCh. 9 - Prob. 3QPCh. 9 - Prob. 4QPCh. 9 - Prob. 5QPCh. 9 - Prob. 6QPCh. 9 - Prob. 7QPCh. 9 - Prob. 8QPCh. 9 - Prob. 9QPCh. 9 - Prob. 10QPCh. 9 - Prob. 11QPCh. 9 - Prob. 12QPCh. 9 - Prob. 13QPCh. 9 - Prob. 14QPCh. 9 - Prob. 15QPCh. 9 - Many plumbers charge the same price for coming to...Ch. 9 - Prob. 17QPCh. 9 - Prob. 18QPCh. 9 - Prob. 1WNGCh. 9 - Prob. 2WNGCh. 9 - According to the accompanying table, what quantity...Ch. 9 - Prob. 4WNGCh. 9 - Prob. 5WNGCh. 9 - Prob. 6WNGCh. 9 - Prob. 7WNGCh. 9 - Prob. 8WNGCh. 9 - Prob. 9WNGCh. 9 - Prob. 10WNG
Knowledge Booster
Similar questions
- The following graph plots the marginal cost (MC) curve, average total cost (ATC) curve, and average variable cost (AVC) curve for a firm operating in the competitive market for sun lamps. COSTS (Della) 72 04 8 56 24 16 . 0 Price (Dollars per lamp) MOD 8 12 36 48 60 10 ATC AVC 40 00 QUANTITY (Thousands of lamps) For every price level given in the following table, use the graph to determine the profit-maximizing quantity of lamps for the firm. Further, select whether the firm will choose to produce, shut down, or be indifferent between the two in the short run. (Assume that when price exactly equals average variable cost, the firm is indifferent between producing zero lamps and the profit-maximizing quantity of lamps.) Lastly, determine whether the firm will earn a profit, incur a loss, or break even at each price. Quantity (Lamps) ? Produce or Shut Down? Profit or Loss?arrow_forwardWould a cost function of 0 mean a linear line of supply curve? For example if 10 firms are on the market selling 10 goods and the cost function is 0?arrow_forwardSuppose you own a business form that faces the following demand curve: P = 8 0 - 2 Q . Further, MC = AC = $ 2 0 . Under “ the benchmark case ” , calculate the maximum amount of profits your firm can earn. 2 . Suppose you are earning the maximum profit, but your lease is up for renewal and the property owner wants to increase the rent by $ 5 0 0 . a . In response to the $ 5 0 0 additional cost, would you raise the price to cover the additional cost? Explain why you would or would not. Notice, rent is a fixed cost. b . In response to the $ 5 0 0 additional cost, suppose you implement a two - part tariff pricing strategy. Compute the amount of profit under the two - part tariff. c . Explain why the revenue is necessarily higher under the two - part than under the benchmark case.arrow_forward
- Your friend is going to start a business. One important decision he/she has to make is setting prices for the products. In economics, a firm may set its prices differently under different situations. Based on the economic theories learned in this course, explain to your friend how a profit-maximizing firm should set its prices under different situations.arrow_forwardThe table below provides revenue and cost information for a perfectly competitive firm producing computers. Over what output range will this firm incur losses? What is the slope of the total revenue curve? At about how many computers per day do economic profits seem to be at a maximum? Graph the economic model of this firm.arrow_forwardAnswer first 3 questionsarrow_forward
- Suppose that the tuna industry is in long-run equilibrium at a price of $5 per can of tuna and a quantity of 150 million cans per year. Suppose that the Centers for Disease Control (CDC) announces that a chemical found in tuna helps prevent many viral infections from spreading. The CDC's announcement will cause consumers to demand tuna at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the CDC's announcement. 10 9. Supply Demand 7 Supply 4 3 Demand 2 1 30 60 90 120 150 180 210 240 270 300 QUANTITY (Millions of cans) PRICE (Dollars per can)arrow_forwardExercise 5.4 A company is producing and selling branded milk with the following total cost function: CT(q)= 0.2q²+q+70. If the demand function for this brand of milk is: P=15-0.5q: a) Calculate the optimal price of milk, as well as the optimal quantity sold and the profits of the company. b) Calculate the price elasticity of demand in the equilibrium of the company. c) Justify why the company has an excess of productive capacity. d) Represent graphically.arrow_forwardOne of the students states that this actually is beneficial to the firm because less output means more profit. Is that student correct? The key to solving the puzzle is the marginal principle.arrow_forward
- Homework (Ch 14) 6. Deriving the short-run supply curve Consider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 100 90 80 70 60 АТС 50 40 30 20 AVC MC O 10 25 30 35 40 45 50 5 10 15 20 QUANTITY (Thousands of shirts) COSTS (Dollars)arrow_forwardConsider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. COSTS (Dollars) 100 90 80 70 60 30 20 10 0 0 ☐ 3 MC 6 15, 20 ATC AVC 0 9 12 15 18 21 QUANTITY (Thousands of shirts) 24 27 1 30 (?)arrow_forwardAt what output rate does the firm maximize profit or minimize loss?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning