Suppose that a firm in a competitive market has the following cost curves: 13 12+ 11- 10- Price $3. $4.50 $6.30. 23 Refer to Figure 14-1. The firm's short-run supply curve is its marginal cost curve above O $1. MC ATC AVC 7 8 9 10 11 4
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- 8. Refer to the information in the table below to answer the following questions: TVC €0 10 15 Quantity of fruit baskets 0 1 2 3 4 5 6 TFC €50 50 50 50 50 50 50 21 31 46 68 TC MC -- 10 5 6 10 15 22 a) The firm sells fruit baskets in a perfectly competitive market. Calculate the firm's total cost for each level of production and complete the table. b) Assume that the market price of a fruit basket is €15. To maximize profit, how many fruit baskets should the firm sell? c) At the profit-maximizing quantity, what is the profit?The table below shows the total costs faced by Gregory's Jewelry firm for different quantities of necklaces sold. Quantity 0 1 2 3 4 5 6 7 8 9 10 Total Cost $64 $79 $98 $120 $145 $171 $198 $228 $262 $305 $353 Gregory's Jewelry firm sells necklaces in a perfectly competitive market with a downward sloping demand curve and an upward sloping supply curve. The market price is $32/unit. A. Calculate the average fixed cost of producing 8 units. Show your work. B. Identify the profit maximizing quantity. Explain using marginal analysis. C. Calculate the economic profit at the profit maximizing quantity you identified in Part B. Show your work. D. Based on your answer to Part C, will the number of firms in the industry increase, decrease, or stay the same in the long run? Explain. E. Based on your answer to Part C, will the market price increase, decrease, or stay the same in the long run? Explain. F. The income elasticity of demand for necklaces is -3 and the cross price elasticity of demand…An industry currently has 100 firms, each of whichhas fixed cost of $16 and average variable cost asfollows:Quantity Average Variable Cost1 $12 23 34 45 56 6a. Compute a firm’s marginal cost and average totalcost for each quantity from 1 to 6.b. The equilibrium price is currently $10. How muchdoes each firm produce? What is the total quantitysupplied in the market?c. In the long run, firms can enter and exit themarket, and all entrants have the same costs asabove. As this market makes the transition to itslong-run equilibrium, will the price rise or fall?Will the quantity demanded rise or fall? Will thequantity supplied by each firm rise or fall? Explainyour answers.d. Graph the long-run supply curve for this market,with specific numbers on the axes as relevant.
- Paulina sells beef in a competitive market where the price is $8 per pound. Her total revenue and total costs are given in the table below. Quantity of Total revenue Total cost beef (lb.) 0 1 2 3 4 ($) 0 8 16 24 32 ($) 4 8 13 19 27 Profit ($) 0 8 pounds Marginal revenue ($) c. What is the profit-maximizing (or loss-minimizing) quantity? Marginal Marginal cost ($) profit ($) a. Complete the table. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. b. At what quantity does marginal revenue equal marginal cost? pounds AThe graph below depicts the cost structure for a firm in a competitive market. Use the graph to answer the following questions. Figure 14-2 Price PPPP Q₁Q₂ MC AVC ATC Quantity Refer to Figure 14-2. When price rises from P ₂ to P 3, the firm finds that All of the above are correct. marginal cost exceeds marginal revenue at a production level of Q₂. it earns normal or zero profit. O if it produces at output level Q3 it will earn a positive profit.An industry currently has 100 firms, each of which has fixed cost of $16 and averagevariable cost as follows:Quantity Average Variable Cost1 $ 12 23 34 45 56 6a. Compute a firm’s marginal cost and average total cost for each quantity from 1 to 6.b. The equilibrium price is currently $10. How much does each firm produce? What isthe total quantity supplied in the market?c. In the long run, firms can enter and exit the market, and all entrants have the samecosts as above. As this market makes the transition to its long-run equilibrium, willthe price rise or fall? Will the quantity demanded rise or fall? Will the quantitysupplied by each firm rise or fall? Explain your answers.
- Consider the attached diagram of a competitive market and the typical firm operating in that market. In the long run, what total amount of the product will be supplied in equilibrium? [Hint: what amount do consumers demand at the long-run price?] Price 28 24 20 500,000 700,000 D Price, costs 60 66 78 MC ACAnswer the question on the basis of the following demand and cost data for a specific firm Demand Data (2) Price $10.00 (1) Price $ 11.50 11.00 10.50 10.00 9.60 9.10 8.30 Multiple Choice O 10 units 11 units 9 units 8.85 8.00 7.00 6.10 5.00 4.15 8 units (3) Quantity 6 7 8 9 10 11 12 Output 6 7 8 9 10 Cost Data 11 12 If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be Total Cost $61 62 64 67 72 79 86The table provides data on a market demand schedule (top two rows) and a firm's average and marginal cost schedules (bottom four rows). 1. What is the firm's shutdown point? A firm will stop producing an output in the short run when the market price of the good is O A. equals MC B. equals ATC C. below minimum ATC D. below minimum AVC This firm's shutdown point is at a market price of $ per unit and its profit-maximizing output is units. Price P ($) Quantity Firm's output MC ($) ATC ($) AVC ($) 24 20 16 12 8 4 3,000 4,000 5,000 6,000 7,000 8,000 1 2 3 4 5 6 unit units units units units units 11.00 11.13 12.00 13.63 16.00 19.13 13.50 12.25 12.00 12.19 12.70 13.50 11.63 12.25 13.13 11.25 11.13 11.25
- Suppose that the market for chicken momos is perfectly competitive with ten firms producing momos. Tasty treat is one of the ten price-takers in the market for momos. The accompanying tables show the demand schedule for momos in Dhaka and cost schedule for "Tasty Treat". DEMAND SCHEDULE Price (BDT per plate) Quantity demanded (plate per hour) 10 900 25 675 30 600 40 450 50 300 70 0 COST SCHEDULE OF TASTY TREAT Output (plate per hour) Marginal Cost (BDT per extra plate) Average Variable Cost (BDT per plate) Average total cost (BDT per plate) 40 20 25 90 50 10 10 75 60 30 20 55 70 50 23 50 80 70 35 60 90 85 50 77 a) What is the value of the shut-down price and break-even price for Tasty Treat?How did you figure that out?b) Write down the individual supply schedule of chicken momos for Tasty Treat and the industry supply schedule for chicken momos.c) Plot the market demand and supply curves for chicken momos and find the equilibrium price and…4. A printer paper manufacturer sells its highly standardized product in a perfectly competitive market, at a price of TL50 per box. The firm has a fixed cost of TL30. Fill in the following table and indicate the level of output that maximizes profit. Determine how the profit-maximizing choice of output would change if the fixed cost increased from TL40 to TL60? More generally, explain how the level of fixed cost affects the choice of output. Output (Units) 0 1 2 3 4 5 6 Total Revenue (TL/unit) Total Cost (TL/unit) Profit (TL) Marginal Revenue (TL/unit) Marginal Cost (TL/unit) 50 20 30 42 54 708. Short-run and long-run effects of a shift in demand Suppose that the chicken industry is in long-run equilibrium at a price of $5 per pound of chicken and a quantity of 50 million pounds per year. Suppose that WebMD claims that a protein found in chicken will increase your expected lifespan by 3 years. WebMD's claim will cause consumers to demand more chicken at every price. In the short run, firms will respond by
