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 10, Problem 1P
To determine
Profit maximization.
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Students have asked these similar questions
Suppose rocking chair manufacturing is a perfectly competitive industry in which there are 1,000 identical firms. Each firm's total cost is
related to output per day as follows:
Output Total Revenue ($) Total Variable Cost ($) Total Fixed Cost ($)
1
1,000
750
500
2
2,000
1,250
500
3
3,000
2,000
500
4
4,000
3,000
500
5
5,000
4,500
500
How many chairs would the firm produce at prices of $1,000? (In computing quantities, assume that a firm
produces a certain number of completed chairs each day; it does not produce fractions of a chair on any one day.)
chairs
A profit-maximising firm in a competitive market is currently producing 1,000units of output. It has average revenue of $50, average total cost of $40 and fixed cost of $10,000.a) What is its profit?b) What is its marginal cost?c) What is its average variable cost? Is the efficient scale of the firm more than, less than or exactly 1,000 units?
A profit-maximising firm in a competitive market is currently producing 1,000
units of output. It has average revenue of $50, average total cost of $40 and fixed cost of $10,000.
a) What is its profit?
b) What is its marginal cost?
c) What is its average variable cost? Is the efficient scale of the firm more than, less than or exactly 1,000 units?
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- A purely competitive firm finds that the market price for its product is $20. It has a fixed cost of $100 and a variable cost of $10 per unit for the first 50 units and then $25 per unit for all successive units. Does price exceed average variable cost for the first 50 units? What about for the first 100 units? What is the marginal cost per unit for the first 50 units? What about for units 51 and higher? For each of the first 50 units, does MR exceed MC? What about for units 51 and higher? What output level will yield the largest possible profit for this purely competitive firm?arrow_forwardA profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, average total cost of $8, and fixed cost of $200. What is its profit? What is its marginal cost? What is its average variable cost?arrow_forwardQUESTION 10 Jack sells water bottles. Assume the market for water bottles is perfectly competitive. Jack sells his water bottles at the market price of $9.00. At the profit-maximising output level of 51 water bottles, Jack's average total cost is $4.40 per water bottle. The minimum average variable cost is $3.90 per water bottle. Answer the following questions: a. Jack's economic profit or loss is decimal places (ie: to the nearest cent). (use a negative value if a loss). Answer in dollars, rounded to two b. State whether the following statement is true or false: "At the profit-maximising quantity, Jack is making an economic profit of $4.60 per water bottle." Type T for true, or F for false c. State whether the following statement is true or false: "Jack should shut down if the market price is $3.85 per water bottle." Type T for true, or F for falsearrow_forward
- Suppose each business in a perfectly competitive industry has fixed costs of $12,000 and an average variable cost of $12 when each producing 1000 units and at minimum average cost. What is the break-even price in this perfectly competitive industry?arrow_forwardA firm in a perfectly competitive industry knows the following about its costs and revenue. The firm would like to maximize profit and has hired a consultant for advice. Price Q of Output Total Revenue Total Cost Total Fixed Cost 10 500 TR? 9,400 TFC ? Total Variable Cost Average Total Cost Average Variable Cost MC 6,500 is at minimum level AVC? MC? Total Revenue Number Total Fixed Cost Number Average Variable Cost Number Marginal Cost Number What is the value of the profit or loss (-) at the current output ( include the - sign if it's a loss) Number Consultant's Advice: As a consultant, what advice would you give to this firm:(Choose ONE answer from the following) Number 1. Firm should do nothing; it is already profit maximizing/loss minimizing 2. Firm should reduce quantity of output 3. Firm should increase quantity of output 4. Firm should shutdown operations 5. The given number set is inconsistentarrow_forwardThe graph presents the costs and revenue for a purely Cost and revenue competitive firm, where the market price is equal to $400 per unit of output. Use this information to determine the profit-maximizing output and profit for this firm. $800 (13,800) 750 700 Marginal cost 650 What is the profit-maximizing output of this purely 600 Average total cost (12,600) competitive firm? Round the answer to the nearest 550 whole number. 500 (4,500) (6,450) (12,450), 450 (10,400) 400 Marginal revenue (9,350) 350 profit maximizing output = units of output 300 (6,250) 250 Average variable cost (4,200) 200 What is the profit for the purely competitive firm that 150 |(1,150) produces at the output level in the first question. Round the 100 answer to the nearest whole number. 50 1 2 3 4 7 8 9 10 11 12 13 14 15 Units of output profit = $|arrow_forward
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