Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 21, Problem 5CQ
To determine
The relation between profit and cost of production.
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Chapter 21 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- According to the accompanying table, what quantity of output should the firm produce? Explain your answer.arrow_forwardAt what output rate does the firm maximize profit or minimize loss?arrow_forwardWhat happens to a competitive firm whose cost function exhibits decreasing marginal cost everywhere? Construct a concrete cost function of this type and carry out the search for the profit-maximizing output.arrow_forward
- explain why a firm might want to produce its good even after diminishing marginal returns have set in and marginal cost is rising ?arrow_forwardIn long-run equilibrium, all firms in the industry earn zero economic profit. Why is this true?arrow_forwardHomework (Ch 14) 6. Deriving the short-run supply curve Consider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 100 90 80 70 60 АТС 50 40 30 20 AVC MC O 10 25 30 35 40 45 50 5 10 15 20 QUANTITY (Thousands of shirts) COSTS (Dollars)arrow_forward
- Consider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. COSTS (Dollars) 100 90 80 70 60 30 20 10 0 0 ☐ 3 MC 6 15, 20 ATC AVC 0 9 12 15 18 21 QUANTITY (Thousands of shirts) 24 27 1 30 (?)arrow_forwardExplain why optimal profits should occur when marginal cost equals marginal revenue.arrow_forwardA catering company producing fruit ice, in the Tandy school, has a production function q = 10min(k,l), where k is capital and 1 is labor. a. 15% If v = 81000 and w = 500 and P = 8600, where v, w, and P are as per the lecture notes, how many units of fruit ice will be produced and how much profit will be obtained? b. 10% Draw the supply curve for this catering company.arrow_forward
- According to marginal analysis, a perfectly competitive firm will produce an output level where what is true about its Marginal Revenue and its Marginal Cost?arrow_forward(? 100 90 80 70 60 ATC 50 40 30 20 AVC 10 MC 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of jackets) COSTS (Dollars)arrow_forwardExplain why the firm will still operate in the market if the economic profits are equal to zero. Use the graph to support your answer.arrow_forward
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