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 2DQ
To determine
Pure competition.
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Suppose that the paper clip industry is perfectly competitive. Also assume that the market price for paper clips is 2 cents per paper clip. The demand curve faced by each firm in the industry is: LO10.3 a. A horizontal line at 2 cents per paper clip. b. A vertical line at 2 cents per paper clip. c. The same as the market demand curve for paper clips. d. Always higher than the firm’s MC curve.
The following figure shows the revenue and cost curves for a firm X.
RM
10
a.
b.
C.
7
6
LO
5
4
3.5
0
20 25 30
MC
40
AVC
AC
AR=MR
Units
If a firm X achieves productivity efficiency, what will be the total revenuel
generated
At what price will a firm stop operating? Please explain.
If the market price is RM4.00, what is the total profit or total loss.
4. Various measures of cost
Suppose the imaginary company of Roobek is a small, Jackson-based American apparel manufacturer specializing in athleisure. The following table
presents the brand's total cost of production at several different quantities.
Fill in the remaining cells of the following table.
Quantity Total Cost Marginal Cost
(Pairs) (Dollars) (Dollars)
0
1
2
3
4
LO
5
6
120
200
240
285
340
425
540
Fixed Cost Variable Cost
(Dollars) (Dollars)
Average Variable Cost
(Dollars per pair)
Average Total Cost
(Dollars per pair)
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- In the table below, the firm; Output Total Revenue Total Cost $0 $30 $60 $90 $120 $150 $180 $25 $49 $69 $91 $117 $147 $180 O a. cannot be in a perfectly competitive industry, because its short-run economic profits are greater than zero. O b. must be in a perfectly competitive industry, because its marginal cost curve eventually rises. O c. cannot be in a perfectly competitive industry, because its long-run economic profits are greater than zero O d. must be in a perfectly competitive industry, because its marginal revenue is constant. 123 456arrow_forwardConsider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. COSTS (Dollars per pound) 80 72 64 56 co o 32 + 16 8 0 0 4 MC 0 ATC AVC 8 12 16 20 24 28 QUANTITY (Thousands of pounds) 32 38, 72 36 40 Ⓒarrow_forwardQUESTION 15 If a firm decides to exit the market will be paying O a. only the fixed costs but not the variable costs. O b. neither variable costs nor fixed costs. Oc only the variable cost but not the fixed cost. O d. both variable costs as well as fixed costs. QUESTION 16 Which of the following is true for a perfectly competitive firm? O The price of the product is equal to marginal revenue at all times. The price of the product is equal to marginal cost at all times. Marginal cost is equal to marginal cost at all times Total revenue is equal to total cost at all times.arrow_forward
- Refer to this table to answer the next three questions. The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Quantity 0 1 2 3 4 Profits are maximized when the firm produces O O O 2 0 1 04 O 3 Total Revenue $0 $6 $12 $18 $24 unit(s). Total Cost $6 $8 $12 $17 $24arrow_forwardSuppose the market price for a price taking firm is known to be $2, the total revenue accruing to it if it sells 100 is and the total revenue accruing to it if it sells 200 is O $100, $200 O $200. $400 $200, $400 O 52. S2arrow_forwardQuantity Price 0 20 1 18 2 16 3 14 4 12 5 10 Are the price and quantity combinations above for a perfectly competitive industry? Select one: O a. No, they are not because the demand curve should be perfectly elastic. O b. No, because the quantities are too low. O c. Yes, they are because the demand curve is downward sloping. O d. Yes, they are because the price falls the same amount for each increase in quantity. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- The figure shows a perfectly competitive firm. The firm is operating; that is, it has not shut down. The firm produces O A. 20 units of output and earns a normal profit. MC ATC 50 B. 10 units of output and incurs an economic loss. 40 O C. 10 units of output and earns a normal profit. O D. 20 units of output and incurs an economic loss. 30 MR 20 10 10 30 40 Quantity (per day) Price and costs (dollars) 20arrow_forward7. A car manufacturer builds both left-hand and right-hand drive cars. It estimates that its costs and the demand faced in each of these respective markets can be modelled by the functions below P1 = 520 – 3Q1 P, = 720 – 4Q2 - TC = 100Q1 + 120Q2 + 4Q1Q2 What is the maximum profit the firm could make? O 24300 O 24800 25300 25800 26500 O0000arrow_forwardSuppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + q2 Marginal cost: MC = q where q is an individual firms quantity produced. The market demand curve for this product is Demand:QD = 120 P where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market. a. What is each firms fixed cost? What is its variable cost? Give the equation for average total cost. b. Graph average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity? c Give the equation for each firms supply curve. d. Give the equation for the market supply curve for the short run in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market in the short run? f. In this equilibrium, how much does each firm produce? Calculate each firms profit or loss. Is there incentive for firms to enter or exit? g. In the long run with free entry and exit, what is the equilibrium price and quantity in this market? h. In this long-run equilibrium, how much does each firm produce? How many firms are in the market?arrow_forward
- q 0 1 2 3 4 5 6 TFC $5 5 5 5 5 5 5 TVC $0 3 LO 5 9 16 25 36 MC - $3 2 4 7 9 11 P = MR $5 5 5 5 LO 5 5 5 A profit-maximizing firm should produce a quantity of TR $0 5 10 15 20 25 30 TC $5 8 10 14 21 30 41 Profit $-5 - 3 0 1 - 5 11 units. (Enter your response as a whole number.)arrow_forward7. Long-run cost relationships The following graph shows the short-run average total cost curves and the long-run average cost curve for a publishing firm. The five marked quantities indicate points of tangency between each short-run average total cost curve (SRATC) and the long-run average cost curve (LRAC); for example, Q₁ marks the point of tangency between SRATC₁ and LRAC. The orange point on SRATC3 indicates the firm's current output level in the short run (Q3). COST PER UNIT SRATC₁ LRAC SRATC2 | " Q₂2₂ SRATC3 O " | 1 1 Q3 QUANTITY OF OUTPUT Q₁ SRATC5 SRATC4 1arrow_forwardThe table below describes a firm that sells output in a perfectly competitive market. Note the second column describes total costs. O $8 O $12 O $6 Output O $4 0 1 2 3 4 5 Which of the following market prices would cause the firm's profit-maximizing output level to be equal to 5? 6 Total Cost (in dollars) $3 $9 $14 $18 $23 $30 $40 4arrow_forward
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