Microeconomics
21st Edition
ISBN: 9781259915727
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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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
L
0
A
F
B
G
C
M
At the profit-maximizing level of output:
MC
ATC
AVC
MR
Quantity
a. the firm is earning economic profit.
b. profits per unit are the highest relative to all other output choices.
c. profit equals ZC.
d. costs exceed revenue.
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.
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- A 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_forwardThe 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_forward
- Price 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_forwardUnder what circumstances might you expect the demand curve of the firm to be a. Vertical? b. Horizontal? c. Negatively sloping? d. Positively sloping?arrow_forwardThe 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_forward
- Draw 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_forwardIn 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_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_forward
- A profit-maximizing firm in a competitive market is currently producing 500 units of output. It has average revenue of $10, average total cost of $8, and fixed costs of $200. a. What is its profit? b. What is its marginal cost? c. What is its average variable cost? d. Is the efficient scale of the firm more than, less than, or exactly 100 units?arrow_forwardDetermine a firm’s profit-maximizing decision in the short run.arrow_forwardIf a perfectly competitive firm decides to operate at a loss in the short run, it will minimize that loss by producing the quantity at which * the ATC is minimized. the AVC is minimized. the MC equals the price. the ATC equals the price. O the AVC equals the price.arrow_forward
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