Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 11.6, Problem 1QQ
To determine
Price determination.
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For the pizza seller whose marginal, average variable, and average total cost curves are shown below.
a. What is the profit maximizing level of output and profit of this firm if the price of pizza is $3.50?
b. Below what price will this firm shut-down in the short-run?
c. If the price was $4.50, what would this firm's profit be?
Price
Average total cost
AVC
Demand
Marginal
cost
Marginal revenue
Q
Quantity
Discuss the firm plotted on the figure. What type of firm do you see?is the firm operating at the optimal point of production? is the firm making a proht? s the firm operating in
the short or in the long run?
. A perfectly competitive, profit maximizing firm earns zero economic profit in the long run. The firm's
total cost is: TC = a + bQ?. Use only the cost curve given.
a. Determine mathematically the level of output the firm will produce in the long run.
Chapter 11 Solutions
Economics (Irwin Economics)
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- The short-run supply curve for a price-taking firm is given by: Select one: a. its short-run marginal cost curve above average fixed cost b. its entire short-run marginal cost curve c. its short-run marginal cost curve above minimum average total cost d. its short-run marginal cost curve above minimum average variable cost e. the positively sloped portion of its average cost curvearrow_forwardA Milton company works in perfect competition market, its total cost curve in short run isgiven in this function:TC = 200 − 4Q + 0.5Q2a. What output level should the firm produce to maximize profit? knowing that averagerevenue is $10.b. What is the firm profit at this level of output?arrow_forwardFor a burger seller Marginal, average variable and average total cost curves are attached below: 1. what is profit maximizing level of output and profit of this firm if the price of burger is $3.50? 2. Below what price will this firm shut down in the short run? 3. If the price was $4.50 ehat would be the firm's profit?arrow_forward
- The following figure shows the marginal cost curve, average total cost curve, average variable cost curve, and marginal revenue curve for a firm for different levels of output. Price R W S 0 A F H B G MC K ATC AVC MR Quantity Assuming that price at OR is $10, the profit maximizing level of output for the firm is 1. OA where marginal cost just covers AVC 2. OB where average profit per unit is the greatest 3. OC where marginal cost equals the $10 price 4. OK where average cost equals marginal revenue and the firm earns a normal rate of returnarrow_forwardConsider a kettle firm A in a perfectly competitive market. Table 1 shows the quantity produced per hour (Q) and the total cost (TC) in the short run. Quantity 0 12345C70 2 6 8 Total cost 17 30 40 55 75 100 130 165 210 Fixed cost 17 17 17 17 17 17 17 17arrow_forwardPrice MC ATC IC MR Quantity a. What area(s) of the graph represent(s) total revenue for this firm if it was profit maximizing? b. What area(s) of the graph represent(s) total cost for this firm if it was profit maximizing? c. What area(s) of the graph represent(s) profits for this firm if it was profit maximizing? d. What area(s) of the graph represent(s) deadweight loss if the firm was profit maximizing?arrow_forward
- In the figure below, the firm's initial average total cost curve is SRAC with an initial marginal cost curve of SRMC. The price of the product is Pl. In the short run the firm will produce output equal to the amount SRMC LRAC SRAC P1 Q1 Q2 Q3 Quantity (per day) Q4 O a. Q2 O b. Q4 Oc. Q1 93 Price and costs (dollars)arrow_forwardDraw the cost curves for a typical firm. For a given price, explain how the firm chooses the level of output that maximizes profit. At that level of output, show on your graph the total revenue of the firm. Show its total costs.arrow_forwardDetermine a firm’s profit-maximizing decision in the short run.arrow_forward
- Suppose you are the production manager of a small perfectly competitive firm making a single product. Explain whether each of the following factors does or does not affect the profit maximizing level of output your perfectly competitive firm makes. Is your answer different in the short run compared to the long run. Explain. 1. Employee wages increase 2. Interest rates go down on the loans held by the firm 3. Deamnd for the firm's product increasesarrow_forwardDollars Р PW > V 0 H X Y Z Quantity an economic profit of WPHG. an economic profit of VPHF an economic loss of VWGF O an economic loss of WPHG. MC ATC AVC MR From the graph above, at the profit-maximizing output, this firm will realizearrow_forwardExplain the fact that the short-run supply curve for a price taking firm is that segment of its marginal cost (MC) curvethat lies above the average variable cost curve?arrow_forward
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