Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 24, Problem 3E
To determine
To explain:
The reasons for a firm will continue to produce at a price less than the average cost in the short run.
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- Why will a firm never plan to supply an output at which it has increasing returns to scale?arrow_forwardGive an example of a price at which this firm would want to produce and sell output in the short run, but not in the long run.arrow_forwardFor each of the following events identify which of the determinates of demand or supply are affected. Also indicate whether demand or supply is increased or decreased. Why? A stock market crash lowers people’s wealth. Batelco increases the prices of mobile services. Diminishing returns mean rising costs while economies of scale mean falling costs. Therefore, a firm cannot be facing both diminishing returns and economies of scale. Do you agree? Why or why not?arrow_forward
- The correct answer to whether it should be produced is that the firm should produce in the short term if it can either make a profit or a loss less than its total costs. True or falsearrow_forwardexplain why a firm might want to produce its good even after diminishing marginal returns have set in and marginal cost is rising ?arrow_forwardThe marginal cost of producing the third unit of output isarrow_forward
- Why should a firm shut down if its average variable cost curve is above the price of their product?arrow_forwardThis company wants to maximize its profit in the short run. How much is a profit-maximizing quantity and price in the short run? Why? How much is its profit at that profit-maximizing quantity?arrow_forwardIn the long run, perfectly competitive firms make zero economic profit. If this is the case, why does the firm even bother producing? Why not exit the market completely?arrow_forward
- Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm’s total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) Price Quantity Total Revenue Fixed Cost Variable Cost Profit (Dollars per instant pot) (Instant pots) (Dollars) (Dollars) (Dollars) (Dollars) 25.00 1,600,000 70.00 1,600,000 100.00 1,600,000arrow_forwardUsing the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm’s total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) Price Quantity Total Revenue Fixed Cost Variable Cost Profit (Dollars per instant pot) (Instant pots) (Dollars) (Dollars) (Dollars) (Dollars) 25.00 1,600,000 70.00 1,600,000 100.00 1,600,000 If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $1,600,000 per day. In other words, if it shuts down, the firm would suffer losses of $1,600,000 per day until its fixed…arrow_forward
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