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 22, Problem 7CQ
To determine
Shut down point of a perfect competitive firm.
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In the long run, when there are economic losses, firms leave the industry, which will decrease the market supply and increase the price until economic losses are zero. True False
What is the profit maximizing quantity of output?
What price should the firm charge for its output?
For that price and quantity does the firm make economic profit, economic loss or breaks even? How do you know? Explain your answer.
In long-run equilibrium, all firms in the industry earn zero economic profit. Why is this true?
Chapter 22 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- why competitive firms stay in business if they make zero profit?arrow_forwardMany economists would argue that there is no such thing as perfect competition in the real world. What limitations to that theory would support their argument?arrow_forwardWhy do economists believe that economic profit is the more accurate measure of a business success? Why is economic profit the superior method of determining a business success?arrow_forward
- The data in the following table give information about the price P (in dollars) for which a perfectly competitive firm can sell a unit of output and the total cost of production, where quantity is q, total cost is C, marginal cost is MC, total revenue is TR, marginal revenue is MR, and profit is . Fill in the blanks in the following table. (Enter your responses using integers.) q 0 1 Further, profit will 2 3 4 5 6 7 8 9 10 11 C 100 150 178 198 212 230 250 272 310 355 410 475 MC TR Show what happens to the firm's output choice and profit if the price of the product falls from $50 to $40. If the market price falls from $50 to $40, then the firm's output will from $ to $ from P = 50 MR (Enter your responses using integers.) units to π TR P = 40 MR units. (Enter your responses using integers.) πarrow_forwardThe graph attached illustrates the Demand, Marginal Revenue, Marginal Costs, Average Total Costs and Average variable Cost curves for a firm in a perfectly competitive market. What is the Optimum level of the output for the firm and what is the maximum price the firm can charge? How do you know? At this price and output combination does the firm make economic profit of economic loss? Explain your answer. Calculate the economic profit or loss? Show your calculations.arrow_forwardThe optimal level of production for any company is the level of production that either maximizes profits or minimizes losses. How does one determine the optimal level of production for any business? Explain. Explain why a company would shut down in the short run. Explain how a company could choose to get bigger, yet lower their average costs? What are the major characteristics of a firm competing under conditions of perfect competition? What are the major characteristics of a firm competing under conditions of monopoly? How does a demand curve differ in perfect competition from a demand curve in a monopoly? Name an example of a local monopoly?arrow_forward
- The figure below represents the short-run curves for TK Ltd, a popular Chinese cuisine restaurant. Answer the questions below. What market structure do you think TK Ltd is in? Explain using the characteristics of the market structure. What price does TK Ltd charge and what quantity does the firm produce to maximize profit or loss? Calculate this firm’s profit or loss. If this is a typical firm in the market, what do you think will happen to market supply and profit for this industry in the long run? Briefly explainarrow_forwardSuppose the market for apples is perfectly competitive. The short-run average total cost and marginal cost of growing apples for an individual grower are illustrated in the figure to the right. 40- 36- Assume that the market price for apples is $26.00 per box. What is the 32- MC profit-maximizing quantity for apple growers to produce? 75 boxes. 28- (Enter your response as an integer.) 24- At this level of output, profit will be $ 1950. (Enter your response rounded to the nearest dollar.) 20- ATC 16- 12- 8- 4- 10 20 30 40 50 60 70 80 90 100 Output (boxes of apples per day) Price (dollars per box)arrow_forwardStrictly speaking, pure competition is relatively rare. Then why study it?arrow_forward
- You read in a business magazine that farmers are reaping high profits. With the theory of perfect competition in mind, what do you expect to happen over time (in the long run) to each of the following? The equilibrium output in agricultural markets based on what happens to the price given the change in supply, what do you think will happen to the equilibrium quantity? Will it remain the same, increase or decrease?arrow_forwardHow much profit is the typical firm making? at what equilibrium price are all economic profits eliminated? how many firms will be producing frisbees at long term price?arrow_forwardThe data are for a firm operating in perfect competition. Output 1 Marginal Costs Average Variable Costs 70 65 60 60 62 64.3 70 76.25 2 3 4 5 6 7 8 70 60 50 60 70 80 100 120 Average Costs 200 130 103.3 92.5 88 86 88.6 92.5 Use the table above to answer this question. If the market price is $80, what is the profit-maximizing output and will be the firm profit or loss?arrow_forward
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