Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Question
Chapter 14.A, Problem 1QE
a)
To determine
The profit-maximizing level of price and output.
b)
To determine
The profit-maximizing level of output and price of a
c)
To determine
Comparison between the results obtained in part (a) and part (b).
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Students have asked these similar questions
If a perfectly competitive firm's average total cost is less than the price, then the firm
A) incurs an economic loss.
B) makes an economic profit.
C) makes zero economic profit.
D)
makes either zero economic profit or an economic profit depending on
whether the marginal revenue is equal to or greater than the price.
E)
None of these answers is correct because the relationship between the price
and average total cost has nothing to do with the firm's profit.
Perfect Competition
MC - Marginal Cost
MR - Marginal Revenue
ATC - Average Total Cost
AVC - Average Variable Cost
Refer to the figure above. If this firm decides to operate and is producing the profit-maximizing quantity, then the firm's profit will be:
$40
$0
- $40
$240
Consider a typical firm in a perfectly competitive industry. The firm has a total cost function of TC = 100 + 4q^2 (and thus MC= 8q). If the current market price is 50 then:
a. The firm will not shutdown in the short run but will leave the industry in the long run.
b. The firm will shutdown in the short run and will leave the industry in the long run.
c. The firm will not shutdown in the short run and will stay in the industry in the long run.* **
d. The firm will shutdown in the short run but will stay in the industry in the long run.
e. None of the above.
Why is the answer C? Please provide explanation of shut down points in the short run and long run with AVC, ATC, etc.
Chapter 14 Solutions
Microeconomics
Ch. 14.1 - Prob. 1QCh. 14.1 - Prob. 2QCh. 14.1 - Prob. 3QCh. 14.1 - Prob. 4QCh. 14.1 - Prob. 5QCh. 14.1 - Prob. 6QCh. 14.1 - Prob. 7QCh. 14.1 - Prob. 8QCh. 14.1 - Prob. 9QCh. 14.1 - Prob. 10Q
Ch. 14.A - Prob. 1QECh. 14.A - Prob. 2QECh. 14.A - Prob. 3QECh. 14.A - Prob. 4QECh. 14 - Prob. 1QECh. 14 - Prob. 2QECh. 14 - Prob. 3QECh. 14 - Prob. 4QECh. 14 - Prob. 5QECh. 14 - Prob. 6QECh. 14 - Prob. 7QECh. 14 - Prob. 8QECh. 14 - Prob. 9QECh. 14 - Prob. 10QECh. 14 - Prob. 11QECh. 14 - Prob. 12QECh. 14 - Prob. 13QECh. 14 - Prob. 14QECh. 14 - Prob. 15QECh. 14 - Prob. 16QECh. 14 - Prob. 17QECh. 14 - Prob. 18QECh. 14 - Prob. 19QECh. 14 - Prob. 20QECh. 14 - Prob. 21QECh. 14 - Prob. 22QECh. 14 - Prob. 23QECh. 14 - Prob. 24QECh. 14 - Prob. 25QECh. 14 - Prob. 1QAPCh. 14 - Prob. 2QAPCh. 14 - Prob. 3QAPCh. 14 - Prob. 4QAPCh. 14 - Prob. 5QAPCh. 14 - Prob. 6QAPCh. 14 - Prob. 7QAPCh. 14 - Prob. 1IPCh. 14 - Prob. 2IPCh. 14 - Prob. 3IPCh. 14 - Prob. 4IPCh. 14 - Prob. 5IPCh. 14 - Prob. 6IPCh. 14 - Prob. 7IPCh. 14 - Prob. 8IPCh. 14 - Prob. 9IP
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- The data in the table to the right give the total cost, C, and marginal cost, MC, for a profit maximizing firm in a perfectly industry market at each possible level of output, q. (Enter all numeric responses using integers.) What is marginal revenue when the market price is $46? MR = $46. What is marginal revenue when market price is $40? MR = $ 40 What happens to the firm's output choice and profit if the price of the product falls from $46 to $40. If the market price falls from $46 to $40, then the firm's output will from units to units. 06 q 1 23 456 7 9 10 11 C 100 150 178 198 212 230 250 272 310 355 410 475 MC 50 28 20 14 18 20 22 38 45 55 65arrow_forwardin a perfectly competitive market with a constant cost industry, there are currently 100 identical firms, each with the total cost function TC(Q) = Q^2 + 4Q + 36. The market demand is Q = 1800 – 50p. a. What is the price at the short-run equilibrium? What is the net profit/loss of each firm at this price? b. In the long run, how many firms will enter into /exit from the market?arrow_forwardThe information below applies to a competitive firm that sells its output for $45 per unit. When the firm produces and sells 100 units of output, its average total cost is $24.5.When the firm produces and sells 101 units of output, its average total cost is $24.65. Suppose the firm is currently producing and selling 100 units of output. Should the firm increase its output to 101 units? a. Yes, because the marginal revenue exceeds the marginal cost. b. Yes, because the marginal revenue exceeds the average total cost c. No, because the marginal cost exceeds the marginal revenue. d. No, because the average total cost exceeds the marginal revenue.arrow_forward
- In a competitive market, the industry demand and supply curves are P = 70-QD and P = 40+2QS. w. Find the market equilibrium price and output.arrow_forwardA perfectly competitive firm faces the short-run cost schedule shown in Table 1. A) Calculate average total cost (ATC=TC/Q), marginal cost (MC=∆TC/∆Q) and marginal revenue (MR=∆TR/∆Q) for each level of output. The price per unit of output is £16. B) Plot ATC, MC and MR on a graph and mark the profit-maximising output. At what output is profit maximised? C) How much profit/loss is made at the optimum level of output?arrow_forwardIn a competitive market characterized by increasing costs, the long-run industry supply curve gives the minimum long-run average cost of production at various levels of industry output. long-run industry supply curve gives the long-run marginal cost of production at various levels of industry output. long-run industry supply curve is upward sloping. both a and b all of the abovearrow_forward
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