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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Question
Chapter 23, Problem 16CQ
(a)
To determine
The level of output that maximizes the profit of the firm.
(b)
To determine
The price charged by the firm.
(c)
To determine
Total revenue, cost, and profit of the firm.
(d)
To determine
Change over the time in the market.
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Using the graph answer the following questions:
A: At the profit maximizing level of output, what is the firm's total revenue?
B: At the profit maximizing quantity, what is the firm's total cost?
C: At the profit maximizing quantity, what is the firm's profit?
D: Assuming that most firms in the industry have similar costs, describe what happens in this market to bring the industry to a long-run equilibrium (where there are zero profits).
Use the table below to answer the following questions:
Quantity
Demand (Price)
Marginal Revenue
Marginal Cost
Average Cost
1
$1200
1200
500
500
2
1100
1000
275
388
3
1000
800
225
333
4
900
600
250
313
5
800
400
400
330
6
700
200
500
358
7
600
0
700
407
What is this firm’s profit-maximizing price? What is its profit-maximizing output?
What is the firm’s average profit? What is the firm’s total profit?
If at least one consumer is willing to pay $1200 for this product, why won’t the monopolist charge $1200?
Solve for the following questions:
a. what is the marginal revenue when the firm increases output from 4 to 5?
b. what is the marginal revenue when the firm increases the output from 5 to 6?
c. what is the marginal cost when the firm increases the output from 4 to 5?
Chapter 23 Solutions
Economics: Private and Public Choice (MindTap Course List)
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Similar questions
- Please graph what the market looks like with a short decrease in demand and what one firm looks like with a short run decrease in demand. Please make sure to graph your answer with all necessary labeling.arrow_forwardHELP PLEASE!!! There are two questions here. 1. Is the firm maximizing profit? 2. What quantity of output should the firm produce in the long run?arrow_forwardHow does a market compete with other firms efficiently to maintain profit in a competitive market over time? Show diagram with shifts in price, cost, quantity, etc.arrow_forward
- A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, average total cost of $8, and fixed cost of $200. What is its profit? What is its marginal cost? What is its average variable cost?arrow_forwardpart 3 4 Question 8 You are given the following information about the market for Birkin Bags: The formula for Demand is as follows: Qd: 400,000-10*P. It's Cost Function is 20,000,000 + 600Q Questions: (1) What is the price (P) where REVENUE is maximized? (2) What is the price (P) that maximizes PROFITS? (3) What is the QUANTITY (Q) that maximizes profits at that price? (4) What are TOTAL PROFITS at that price?arrow_forwardA. If a firm operating in a perfectly competitive market doubles the amount it sells, what happens to the price of its output and its total revenue? B. How does a competitive firm determine its profit-maximizing level of output? When does a competitive firm decide to temporarily shut down in the short run? Explain, using the concepts of marginal cost, marginal revenue, price, and average variable cost.arrow_forward
- Is a firm that satisfies the immediate needs and wants of target markets always doing what’s best for its consumers in the long run?arrow_forwardThere are several pen manufacturers in Corinthia. However, the pens sold by each manufacturer have a unique design. How will the demand for pens faced by the existing pen manufacturers in Corinthia be affected if new firms enter the industry in the long run? a. The demand curve faced by the existing firms will become perfectly elastic. b. The demand faced by the existing firms will decrease. c. The demand curve faced by the existing firms will become perfectly inelastic. d. The demand faced by the existing firms will increase.arrow_forwardUsing the graph on the next page, do the following problems: Determine the profit maximizing level of output when the market price for the good is $75/unit. Show this on the graph by making the appropriate drawing (with a straight-edge). Also, write the number (an appropriate estimate should be made) below the graph. • On the graph, show the maximum total profit that can be generated by the firm based on the market price. Do NOT calculate the value - show the appropriate box on the graph. Be careful in your (straight) lines. Be clear as to the part of the graph that represents the profit. Use shading as appropriate. • Below the graph, write the interpretation of the values of the marginal cost (MC) and the average total cost (ATC) at the profit-maximizing level of output; make sure to use all the appropriate names and units. Write the values and interpretations below the graph. • Answer the following questions: If the market price of the good falls, the profit maximizing level of…arrow_forward
- Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm? Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?arrow_forwardDraw the cost curves for a typical firm. For a given price, explain how the firm chooses the level of output that maximizes profit. At that level of output, show on your graph the total revenue of the firm. Show its total costs.arrow_forward16. The accompanying graph shows the short-run demand and cost situation for a price searcher in a market with low barri- ers to entry. a. What level of output will maximize the firm's profit level? b. What price will the firm charge? c. How much revenue will the firm receive in this situation? How much is total cost? Total profit? d. How will the situation change over time?arrow_forward
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