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 10.6, Problem 3QQ
To determine
Normal profit.
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A purely competitive firm finds that the market price for its product is $25.00. It has a fixed cost of $100.00 and a variable cost of $10.00 per unit for the first 50 units and then $30.00 per unit for all successive units.
Instructions: Round your answers to 2 decimal places.
a. Does price equal or exceed average variable cost for the first 50 units?
(Click to select) No Yes
What is the average variable cost for the first 50 units?
b. Does price equal or exceed average variable cost for the first 100 units?
(Click to select) No Yes
What is the average variable cost for the first 100 units?
c. What is the marginal cost per unit for the first 50 units?
What is the marginal cost for units 51 and higher?
d. For each of the first 50 units, does MR exceed MC?
(Click to select) No Yes
What about for units 51 and higher?
(Click to select) No Yes…
If the price that a firm with no market power receives is $10,
its minimum AVC is $8 and its minimum ATC is $15 then
Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.
a. the firm will make a loss and shut down immediately
b. the firm can make a profit
c. it will make a loss and choose to continue to produce in the short run
d. the firm enjoys increasing returns to scale.
e. None of the above.
Assume the following total cost schedule for a perfectly competitive firm.
Output
TVC (S)
TFC ($)
100
1
40
100
2
70
100
3
120
100
180
100
250
100
6.
330
100
TABLE 9-1
Refer to Table 9-1. If the firm is producing at an output level of 6 units, the ATC is
and the AVC is
Select one:
a. $71.67: $55
b. $38.33: $16.67
C $55: $16.67
d. $55: S80
e. $80: $55
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- Case D: Apex Company. Apex is a perfectly competitive firm. It has total fixed costs of $300/day and a daily variable cost schedule in the table below. Apex’s product sells for $200 per unit. Quantity (units) 0 1 2 3 4 5 6 7 8 9 10 Total Variable Cost (TVC) 0 100 180 220 300 390 500 640 800 1000 1250 Answer the following questions: What is the profit-maximizing level of output? Calculate Apex’s profit. If the market price dropped to $80, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case? If the market price dropped further to $40, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case? Comment on your answers to parts (2) and (3).arrow_forwardCurrently the firm is producing at a profit maximizing quantity of output and has a total revenue of $5000. Variable costs are $4000 and Fixed costs are $2000. Which of the following is true for this firm in the short run: A. The firm should continue producing at a loss B. The firm should shut down immediately C. The firm should continue to produce since it is making profit D. The firm should adjust (increase or decrease) outputarrow_forwardIn a short-term perfectly competitive market, profit-maximizing company A's marginal cost is 50, average variable cost is 45, and average total cost is 55 under the current production level. When the market price is 50, which of the following statements is correct? A. The company is experiencing losses. B. The company should shut down. C. Total variable cost can be covered by total revenue. D. Sunk cost is higher than total variable cost О А, С О А, В, С ○ A, C, D ○ B, D ○ B, C, Darrow_forward
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- The table below shows cost and revenue information for Choco Lovers, a purely competitive firm producing different quantities of chocolate gift boxes. Fill in the blanks in the table. Instructions: Enter your answers rounded to two decimal places. Quantity of Gift Boxes 20 25 30 35 40 45 b. Total revenue = Choco Lovers Cost and Revenue TC ($) ATC ($) 5.75 5.50 5.42 c. Profit = $ 227.50 d. Profit per unit = $ 115.00 137.50 162.50 192.50 232.50 282.50 Assume the profit-maximizing price is $8 per gift box, and then answer the following questions: a. Profit-maximizing quantity = 35 gift boxes 12 5.81 6.28 MC ($) per gift box 5.00 4.50 5.00 6.00 8.00 10.00arrow_forwardThe profit maximizing output level for this firm is A. 0. B. 25. C. 40. D. 70. E. somewhere between 40 and 70.arrow_forwardB) Consider a perfectly competitive firm with the following short-run total costs: SRTC = b + j q x. The corresponding short-run marginal cost is given by:SRMC = xj q x-1. 1. If the market price is n, how much output (q) will the firm produce? What will thefirm’s profits are at a price of n? 2. Find the quantity of output for which marginal cost equals average variable cost.What does this information tell you about this firm’s decision about whether toshut down in the short run rather than produce a positive quantity of output?arrow_forward
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