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 11, Problem 1P
To determine
The rate of return and economic profit.
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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.
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.
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.
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- 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)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_forwardA firm in a purely competitive industry is currently producing 1,000 units per day at a total cost of $450. If the firm produced 800 units per day, its total cost would be $300, and if it produced 500 units per day, its total cost would be $275. What are the firm’s ATC per unit at these three levels of production? If every firm in this industry has the same cost structure, is the industry in long-run competitive equilibrium? From what you know about these firms’ cost structures, what is the highest possible price per unit that could exist as the market price in long-run equilibrium? If that price ends up being the market price and if the normal rate of profit is 10 percent, then how big will each firm’s accounting profit per unit be?arrow_forward
- LO 11.2: I can calculate marginal cost, revenue, and profit and distinguish between marginal cost and average cost. Suppose that Patrick's Handmade Puppets has a production cost that is given by C(x) = 2,000 + 130x – 0.6x2 + 0.002x3 dollars (0arrow_forwardCosts of production for each competitive firm is given by: C(q) = 1 + q2. Market demand is Qd = 200 - 5p. What is the number of firms in the long-run equilibrium? O 110 O 150 O 190 210arrow_forwardStuff, Incorporated is a firm with a total revenue of $1,000, marginal cost of $5, and average variable cost of $4. Both the output and input markets are perfectly competitive and Stuff, Inc. is in long run equilibrium. Stuff, Inc.'s output and total fixed costs must be equal to which of the following? O Output 200; Fixed Cost $200 O Output 200; Fixed Cost $400 O Output 200; Fixed Cost $800 O Output 250; Fixed Cost $800 O Output 250; Fixed Cost $400arrow_forward3. Suppose the doll company American Girl has an inverse demand curve of P = 150 - 0.25Q, where Q measures the quantity of dolls per day and P is the price per doll. There production function equals Q = LO.5KO.5, they pay wages of 35 and they pay capital rates of 140. What is their daily long-run profit at the profit-maximizing output level?arrow_forwardThere are 300 purely competitive farms in the local dairy market. Of the 300 dairy farms, 298 have a cost structure that generates profits of $24 for every $300 invested. What is their percentage rate of return? The other two dairies have a cost structure that generates profits of $22 for every $200 invested. What is their percentage rate of return? Assuming that the normal rate of profit in the economy is 10 percent, will there be entry or exit? Will the change in the number of firms affect the two that earn $22 for every $200 invested? What will be the rate of return earned by most firms in the industry in long-run equilibrium? If firms can copy each other’s technology, what will be the rate of return eventually earned all firms?arrow_forwardScenario 5.1 A dentist's practice is organized as a sole proprietorship. Last year the dentist's tota revenue was $320,000 and total costs were $250,000. The dentist left a job paying $112,000 a year to start the sole proprietorship. Question: According to the information in Scenario 5.1, how much accounting profit did the dentist make last year? O $208,000 O $112,000 O $320,000 O $70,000arrow_forwardIndustry Z is made up of the following firms. One firm makes up 40% of the total market sales, one of the firms make up 25%, one of the firms make up 20%, one firm makes up 10%, and the remaining firms make up 5% of the total market sales. What is the HHI for this industry? O 2,730 O 95 O 1.800 O 1,200arrow_forwardq 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_forwardLAST WORD Suppose that minimum efficient scale for producing items with a 3-D printer is 100 times what a typical family would consume in a year Would you expect each family to have its own 3-D printer? What sort of industry structure might arise?arrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
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