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For any company operating in a marketplace, the firm attempts to maximize the value of company's worth by setting output where:
a. P<
b. MR=MC
c. AR=MC
d. costs are lowest
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- If a firm’s current revenues are less than its current variable costs, when should it shut down? If the firm decides to shut down, should we expect that decision to be final? Explain using an example that is not in the book.The relationship between the firm's average variable, average total, and marginal cost curves above: Marginal Reveue = Price = US $ 2.50 ; a) Use the graph to find the Firm's profit-maximizing output. b) If the firm maximizes its profit, how much profit does it make (about)? Should the firm stay in business? c) Will other firms with costs the same as Firms enter the market? Explain.Find TC, MC, AFC, AVC, and ATC from the following table.Instructions: Enter your responses rounded to two decimal places. Units (Q) FC($) VC($) TC($) MC($) AFC($) AVC($) ATC($) 0 100 0 — — — — 1 100 40 2 100 60 3 100 70 4 100 85 5 100 130 (Note: Marginal costs should be interpreted as between levels of output.)
- A company that manufactures bicycles has a fixed cost of $100,000. It costs $100 to produce each bicycle. The selling price is $300 per bike.let x represent the number of bicycles produced and sold.Describe business ventures. a. Write the cost function, C.b. Write the revenue function, R.c. Determine the break-even point. Describe what this meansJeb owns a small marketing company, which he operates from a home office. Jeb’s home office is an example of which of the following? Fixed cost Marginal cost Implicit cost Explicit costUsing the figure above, what is profit/loss for the firm?
- The production manager of a clothing manufacturer estimates that the daily total cost of producing men’s suits is given by the equation: TC=2000+396Q-0.8Q^2. The market price of suits is $300. Which of the following statements is correct? A. Short term, the firm should close because its price is less than its average variable cost. B. Short term, the firm should stay open since price exceeds the average variable cost. C. Short term, the firm should close because it is not earning an economic profit. D. Long term, the firm should stay open since it is earning an economic profitThe following are the cost information of a typical ice tea company in an industry with 100 firms. Output (ice tea per hour) Marginal Cost ($ per ice tea) Average Variable Cost ($ per ice tea) Average Total Cost ($ per ice tea) 3 2.50 4.00 7.33 4 2.20 3.53 6.03 5 1.90 3.24 5.24 6 2.00 3.00 4.67 7 2.91 2.91 4.34 8 4.25 3.00 4.25 9 8.00 3.33 4.44 d) Is the price $8 a short-run or long-run equilibrium price for the industry? If the price is not a long run equilibrium price, what adjustments are likely to happen in the market for it to reach long run equilibrium. e) What price must prevail in the market for a typical firm to operate in the short run? At this price, how many ice tea will be supplied by all firms in the market?The following are the cost information of a typical ice tea company in an industry with 100 firms. Output (ice tea per hour) Marginal Cost ($ per ice tea) Average Variable Cost ($ per ice tea) Average Total Cost ($ per ice tea) 3 2.50 4.00 7.33 4 2.20 3.53 6.03 5 1.90 3.24 5.24 6 2.00 3.00 4.67 7 2.91 2.91 4.34 8 4.25 3.00 4.25 9 8.00 3.33 4.44 a) At the price of $2.20 per ice tea, what is the firm’s profit maximizing level of output? Why is this the profit maximizing level of output for the firm? b) If the market price is $8 per ice tea and the firm is producing six (6) ice tea per hour, is the firm maximizing profit or not? Why or why not? If the firm is not maximizing profit, what should it do to maximize profit? c) At the price of $8 per ice tea, what is the firm’s profit-maximizing level of output? Why is this the profit maximizing level of output? What is the firm’s economic profit at…
- Which of the costs discussed in the chapter is the most important when a firm is deciding how much to produce? Costs that are spent to improve the image of the firm. A firm will choose to increase output if it spends a large amount on advertising and brand image. Fixed costs because these costs are spent and cannot be changed in the time period under consideration. If fixed costs are higher, the firm will choose to produce more output. Variable costs because these costs change as output changes. If the firm wants to maximize profits, it will choose to produce a quantity where variable costs are minimized. Marginal cost because this cost shows the additional cost associated with producing one more unit of output. Firms will use this information to decide to produce more or less output.Question #1: Perfect Competition Kevins Kayak Company produces kayaks. Assume that the kayak industry is perfectly competitive. The firm has a total cost function of TC(Q) = 240,10 12875 4 Q+. Kevin can sell all the kayaks he produces for $1,200 each.(a) How many kayaks should Kevin produce (i.e., find Q)? (b) Calculate the ATC if Kevin produced at the output level you found in Part (a)? (b) How much profit would Kevin make at the output level found in Part (a)? (c) Should Kevin stay in business? You must justify your answer using the shut-downrule (relating price and average variable cost)!The graph below shows a particular firms marginal revenue (mr) marginal cost (mc) and average total cost (atc) curves, where the market is competitive. Suppose that a new management team is brought in and that this team is initially less concerned about maximizing profits than it is simply about making a profit. What range of production quantities will allow the firm to operate while earning a profit? Give you're answer by dragging the qmin to Qmax lines into their correct positions. The output will need to lie somewhere between those limits.