Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 12, Problem 12.5.6PA
To determine
Why the farmer is not charging higher than the market price.
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Suppose Larry runs a small business that manufactures shirts. Assume that the market for shirts is a price-taker market, and the market price is $10
per shirt.
The following graph shows Larry's total cost curve.
Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven shirts that Larry
produces, including zero shirts.
125
100
TOTAL COST AND REVENUE (Dollars)
25
☐
Total Cost
☐
-50
0
1
2
3
4
5
6
7
8
QUANTITY (Shirts)
Total Revenue
A
Profit
(?)
Calculate Larry's marginal revenue and marginal cost for the first seven shirts he produces and plot them on the following graph. Use the blue points
(circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost.
25
2
COSTS AND REVENUE (Dollars per shirt)
0
1
2
3
5
6
7
8
QUANTITY (Shirts)
Marginal Revenue
Marginal Cost
Larry's profit is maximized when he produces
is
shirts. When he does this, the marginal cost of the previous shirt he…
4. Profit maximization in the cost-curve diagram
Suppose that the market for blenders is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.
Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point.
100
90
80
Profit or Loss
70
АТС
30
AVC
20
MC
10
10
15
20
25
30
35
40
45
50
QUANTITY (Thousands of blenders per day)
blenders per day.
In the short run, at a market price of $50 per blender, this firm will choose to produce
PRICE (Dollars per blender)
After serving as President of the United States for eight years, Dena has retired from politics and has decided to become a wheat farmer. The market for wheat is perfectly competitive and the current market price for wheat is $10 per bushel. Dena is currently producing 8 bushels (Dena can only produce this good in whole units). Her total cost at 8 units of output is $88 and her variable cost at 8 units of output is $64. Dena knows that if she produces a 9th unit her total cost will become $97, and if she produces a 10th unit her total cost will become $110. Dena’s goal is to maximize her profits. Based on this information, identify whether each of the following would be true or false and briefly explain your reasoning.
Dena is currently losing money in the short-run and she would be better off if she shutdown and produced zero.
Dena is not currently profit maximizing at 8 units of output and she could increase her profits if she expanded output by one unit.
Dena would increase her…
Chapter 12 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 12 - Prob. 12.1.1RQCh. 12 - Prob. 12.1.2RQCh. 12 - Prob. 12.1.3RQCh. 12 - Prob. 12.1.4PACh. 12 - Prob. 12.1.5PACh. 12 - Prob. 12.1.6PACh. 12 - Prob. 12.1.7PACh. 12 - Prob. 12.1.8PACh. 12 - Prob. 12.1.9PACh. 12 - Prob. 12.2.1RQ
Ch. 12 - Prob. 12.2.2RQCh. 12 - Prob. 12.2.3RQCh. 12 - Prob. 12.2.4PACh. 12 - Prob. 12.2.5PACh. 12 - Prob. 12.2.6PACh. 12 - Prob. 12.2.7PACh. 12 - Prob. 12.2.8PACh. 12 - Prob. 12.3.1RQCh. 12 - Prob. 12.3.2RQCh. 12 - Prob. 12.3.3PACh. 12 - Prob. 12.3.4PACh. 12 - Prob. 12.3.5PACh. 12 - Prob. 12.3.6PACh. 12 - Prob. 12.3.7PACh. 12 - Prob. 12.3.8PACh. 12 - Prob. 12.4.1RQCh. 12 - Prob. 12.4.2RQCh. 12 - Prob. 12.4.3RQCh. 12 - Prob. 12.4.4PACh. 12 - Prob. 12.4.5PACh. 12 - Prob. 12.4.6PACh. 12 - Prob. 12.4.7PACh. 12 - Prob. 12.4.8PACh. 12 - Prob. 12.4.9PACh. 12 - Prob. 12.4.10PACh. 12 - Prob. 12.5.1RQCh. 12 - Prob. 12.5.2RQCh. 12 - Prob. 12.5.3RQCh. 12 - Prob. 12.5.4PACh. 12 - Prob. 12.5.5PACh. 12 - Prob. 12.5.6PACh. 12 - Prob. 12.5.8PACh. 12 - Prob. 12.5.9PACh. 12 - Prob. 12.5.10PACh. 12 - Prob. 12.5.11PACh. 12 - Prob. 12.5.12PACh. 12 - Prob. 12.6.1RQCh. 12 - Prob. 12.6.2RQCh. 12 - Prob. 12.6.3RQCh. 12 - Prob. 12.6.4PACh. 12 - Prob. 12.6.5PACh. 12 - Prob. 12.6.6PACh. 12 - Prob. 12.6.7PACh. 12 - Prob. 12.6.8PACh. 12 - Prob. 12.6.9PACh. 12 - Prob. 12.6.10PACh. 12 - Prob. 12.1CTECh. 12 - Prob. 12.2CTECh. 12 - Prob. 12.3CTE
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