Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 17, Problem 6SPPA
To determine
To compute:
The
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The graph shows the demand curve, marginal revenue curve, and marginal cost
curve of Java Time, Inc., a producer of espresso machines in monopolistic
competition.
Draw a point at the firm's the profit-maximizing price and quantity. Label it 1.
Draw an arrow that shows Java Time's markup.
Draw the average total cost curve such that Java Time does not have excess
capacity. Label it.
Draw a point at the intersection of the ATC curve and the MC curve. Label it 2.
Java Time's markup is $a machine.
240
220-
200-
180-
160-
140
120-
100-
80-
60-
40-
20-
04
0
Price and cost (dollars per machine)
MC
100
200 300 400
Quantity (espresso machines per week)
D
MR
500
Consider the diagram below depicting the revenue and cost conditions faced by a monopolistically competitive firm, and then answer
the following questions.
$40
$35
$30
MC
ATC
$25
$20
$17 A
$15
$10
4.40
$5
3.25
MR
Demand
3
4
5
7
8 9 10
Quantity
Instructions: Round your answers to 2 decimal places.
a. What is total revenue for this firm?
$56.88
b. What is total cost for this firm?
$ $58.88
c. What is this firm's economic profit?
d. This firm is most likely In long-run
]equilibrlum because
Instructions: In order to recelve full credit, you must make a selection for each option. For correct answer(s), click the box once to
place a check mark. For Incorrect answer(s). click the option twice to empty the box.
? P= ATC.
? P> MC.
? MR = MC.
2 the firm is experlencing normal profits.
2 the firm is experlencing economic profits.
7 demand exceeds marginal revenue.
Price and costs
II. The figure is drawn for a monopolistically competitive firm.
PRICE
140
123.33
90
56.67
100 133.33
QUANTITY
MC
ATC
Demand
MR
Refer to the figure above and explain:
A). In order to maximize its profit, how many units the firm will choose to produce? 100
B). When the firm is maximizing its profit, the markup over marginal cost amounts to 50
C). The firm's maximum profit is
D). Efficient scale is reached beyond which level of units? 133.33
Chapter 17 Solutions
Foundations of Economics (8th Edition)
Ch. 17 - Prob. 1SPPACh. 17 - Prob. 2SPPACh. 17 - Prob. 3SPPACh. 17 - Prob. 4SPPACh. 17 - Prob. 5SPPACh. 17 - Prob. 6SPPACh. 17 - Prob. 7SPPACh. 17 - Prob. 8SPPACh. 17 - Prob. 9SPPACh. 17 - Prob. 10SPPA
Ch. 17 - Washtenaw Dairy in Ann Arbor, Michigan, sells 63...Ch. 17 - Prob. 2IAPACh. 17 - Prob. 3IAPACh. 17 - Prob. 4IAPACh. 17 - Prob. 5IAPACh. 17 - Use the following information to work Problems 5...Ch. 17 - Prob. 7IAPACh. 17 - Prob. 8IAPACh. 17 - Prob. 9IAPACh. 17 - Prob. 1MCQCh. 17 - Prob. 2MCQCh. 17 - Prob. 3MCQCh. 17 - Prob. 4MCQCh. 17 - Prob. 5MCQCh. 17 - Prob. 6MCQCh. 17 - Prob. 7MCQ
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