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 11.6, Problem 3QQ
To determine
Profit maximizing output.
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If a firm is producing at a quantity in which the marginal cost exceeds marginal revenue, the firm _____.
A company has a linear total cost and a linear total revenue, where the slope of the revenue line is greater than the slope of the cost line.
How many of the following will allow the firm to reduce the level of their break-even point?
(i) Increase their selling price
(ii) Increase their output
(iii) Increase their fixed costs
(iv) Decrease variable costs
Ā
a.Four
b.One
c.Two
d.Three
e.None
i. Calculate the marginal cost, marginal revenue and profit for each unit of production.Ā
ii. How many units should the firm produce to maximise profit?
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- Chetan's Fishing Rods is a small business that operates as a price-taker. The market price of a fishing rod is $30 and Chetan's long-run costs are given by C(q) = .1qĀ° + 10q + 10, where is the number of fishing rods that Chetan produces. Answer the following: (a) How many rods does Chetan produce to maximize profits? (b) What are his profits? (c) At what level of output are average costs minimized? (d) Find an expression for Chetan's supply curve. (e) Sketch Chetan's supply curve, his marginal cost curve and his average cost curve.arrow_forward0 1 2 3 4 5 Problem 1. Fill out the missing data. Quantity Total Cost Marginal Cost Fixed Cost Variable Cost Average Total Cost - Average Variable Cost 7 10 37 22.5 10.50 15 The market price for the firm's output is $14.50. a) What quantity will the firm produce? Q = b) What is the firm's profit? Profit= P = P = c) What is the breakeven price? d) What is the shutdown price? f) Are consumers or producers affected by the tax more? Explain.arrow_forward1. If profit is maximum at sales of 700 units, does the firm have no choice but to limit sales at this level? Explain your answer. Ā Ā Ā 2. A business firm produces and sells a particular Variable cost is P30/unit. Selling price is P40 per unit. Fixed cost is P60,000. a. What is the break-even quantity and break-even point? Show your solution. Ā Ā Ā Ā 3. A manager makes the statement that output should be expanded as long as average revenue exceeds average Does this strategy make sense? Explain. Ā Ā Ā 4. Suppose that the steel firmās costs are shown below: Complete the table and determine the optimal output to be Price of steel P17 per unit. Output (Q) TFC TVC TC MC TR MR Profit/Loss 0 500 0 Ā Ā Ā Ā Ā 1 500 50 Ā Ā Ā Ā Ā 2 500 90 Ā Ā Ā Ā Ā 3 500 140 Ā Ā Ā Ā Ā 4 500 200 Ā Ā Ā Ā Ā 5 500 270 Ā Ā Ā Ā Ā 6 500 350 Ā Ā Ā Ā Ā 7 500 450ā¦arrow_forward
- LAC turns up at higher scale due the presence of a.Ā Ā barriers to entryb.Ā Ā economies of scalec.Ā Ā diseconomies of scaled.Ā Ā the Law of Diminishing Returns (LDR)e.Ā Ā the Law of Supplyarrow_forwardEconomics A firmās supply curve is key to economic reasoning. Derive the supply curve of an individual firm in the short and in the long run. To that end, start arguing which assumptions on marginal returns imply a first decreasing and then increasing average variable cost curve, and then make use of shut down conditions. Explain in detail and use appropriate diagrams.arrow_forwardConsider a firm with constant marginal costs. Which of the following statements is correct regarding its isoprofit curves? Select one: a. Each isoprofit curve depicts the firmās profit for different outputs for a given price of the output good. b. The isoprofit curves are upward-sloping. c. The isoprofit curves cannot cross. d. The higher the price the higher the profit, so constant profits imply constant prices.arrow_forward
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