Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 12.6.6PA
To determine
Benefits of cost reduction to firms.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Do fixed costs affect perfectly competitive firm’s output decisions in the short run? Briefly explain your answer.
Are there fixed costs in the long run? Do fixed costs affect perfectly competitive firm’s output decisions in the long run? Explain your answers briefly.
The following graph shows the demand curve, as well as the AVC, ATC and MC curves of a company selling rolled oats in a perfectly competitive market. Use the graph to answer the questions.
The goal of the company is to maximize its profit. How many boxes of rolled oats should it sell to attain this goal? What price will it charge?
How much profit does this firm make per month?
Will this company produce or shut down in the short run? Why?
Will this firm exit the market for rolled oats in the long run or not? Why?
Please answer all parts:
How does fixed cost affect marginal cost?
Do fixed costs affect perfectly competitive firm’s output decisions in the short run? Briefly explain your answer.
Are there fixed costs in the long run? Do fixed costs affect perfectly competitive firm’s output decisions in the long run? Explain your answers briefly.
Chapter 12 Solutions
Microeconomics (7th Edition)
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
Knowledge Booster
Similar questions
- According to the accompanying table, what quantity of output should the firm produce? Explain your answer.arrow_forwardSuppose that the market for cashmere sweaters 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 Profit or Loss 80 70 60 40 ATC 30 20 MC AVC 10 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of sweaters per day) In the short run, at a market price of $45 per sweater, this firm will choose to produce 45,000 sweaters per day. On the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $45 and the firm chooses to produce the quantity you already selected. Note: In the following question, enter a positive number, even if it represents a loss. The area of this rectangle indicates that the firm's would be thousand per day in the short run. PRICE (Dollars per sweater)arrow_forwardThe following graph summarizes the demand and costs for a firm that operates in a perfectly competitive market. a. What level of output should this firm produce in the short run? b. What price should this firm charge in the short run? c. What is the firm’s total cost at this level of output? d. What is the firm’s total variable cost at this level of output? e. What is the firm’s fixed cost at this level of output? f. What is the firm’s profit if it produces this level of output? g. What is the firm’s profit if it shuts down? h. In the long run, should this firm continue to operate or shut DOWNarrow_forward
- he following graph summarizes the demand and costs for a firm that operates in a perfectly competitive market. What level of output should this firm produce in the short run? What price should this firm charge in the short run? What is the firm’s total cost at this level of output? What is the firm’s total variable cost at this level of output? What is the firm’s fixed cost at this level of output? What is the firm’s profit if it produces this level of output? What is the firm’s profit if it shuts down? In the long run, should this firm continue to operate or shut down? problem 1-6 are solved, this is subparts.arrow_forwardConsider the perfectly competitive market for steak (a normal good). Starting from long-run equilibrium, show graphically what happens in the short and long run to q. Q. P, and r in the market for steak (in comparison to the starting point) if income increases. Briefly explain.arrow_forwardA perfectly competitive firm is currently maximizing profits. The market for its product is in a long-run equilibrium. Market demand for the product decreases. Briefly explain what happens in the market by describing what will happen to this firm’s production (and most importantly why) as a result of that change. Describe what will happen and why to the firm’s costs and profits as the firm makes its choices. Emphasize why each type of individual cost does or does not change as the firm changes its level of production.arrow_forward
- What is the relationship between economies of scale and the level of market competition?arrow_forwardAn accountant and an economist are looking at a firm’s records and market situation. The accountant exclaims “Look at this huge profit!” and the economist states flatly “They are not earning a dime.” Explain how they can both be right.arrow_forwardSuppose Sophia sells flowers in a perfectly competitive market and always maximizes profit. (a) Given the current market price is $5, Sophia sells 2000 flowers every week and makes zero profit. What are the amounts of marginal revenue, marginal cost and average total cost at this level of output? Briefly explain. (b) Continued from (a), if the market demand decreases, what will be the short-run impact on Sophia’s profit? Explain in detail with diagrams.arrow_forward
- Graphically depict a purely competitive firm in the short-run. You can have the firm making a profit or loss in the short-run. Brief explanation and graphs required.arrow_forwardBriefly explain the reason for why in a competitive market we expect economic profits to be zero inthe long run. Why do firms operate even though they face 0 economic profit?arrow_forwardSuppose the cost of renting a snowy bus were to fall from $30 per hour to $20 per hour. What do you expect would happen in the short-run (stage 1 equilibrium) to (a) the number of cones produced by each snowy bus; (b) total production of cones in the market, and (c) economic profits of snowy bus businesses? Briefly explain (you don't need to do any calculations, just explain inwords).arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage LearningEconomics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning