The output level at which price taking firm’s profit is maximum.

Question

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Answer 1

Question

Chapter 58, Problem 1CYU

a)

To determine

The output level at which price taking firm’s profit is maximum.

a)

Expert Solution

Answer to Problem 1CYU

Referring to the graph, profit will be maximum if firm produces 4 quantities.

Explanation of Solution

At quantity 4, the average total cost and marginal cost is minimum which can be seen in the graph shown below:

Krugman's Economics For The Ap® Course, Chapter 58, Problem 1CYU

Optimum level of output is 4 as per the graph because price taking firms produces their products where MR is equal to MC. At this level of output, MC curve line is crossing MR which means marginal revenues are equal to marginal cost. The firm realizes maximum profit if cost of production is minimum.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

b)

To determine

If the firm earns profit, incur loss or is at BEP when it is at profit maximizing level of output.

b)

Expert Solution

Answer to Problem 1CYU

The firm is at break-even level.

Explanation of Solution

If the firm’s total revenue exceeds total cost then it earns profit whereas if total revenues are equal to total cost then firm is at BEP level. The firm incurs losses if its total cost exceeds total revenues. In the given graph, the firm is at break-even level. This is because the level of output the average total cost and market prices are same.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

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Answer 2

Question

Chapter 58, Problem 1CYU

a)

To determine

The output level at which price taking firm’s profit is maximum.

a)

Expert Solution

Answer to Problem 1CYU

Referring to the graph, profit will be maximum if firm produces 4 quantities.

Explanation of Solution

At quantity 4, the average total cost and marginal cost is minimum which can be seen in the graph shown below:

Krugman's Economics For The Ap® Course, Chapter 58, Problem 1CYU

Optimum level of output is 4 as per the graph because price taking firms produces their products where MR is equal to MC. At this level of output, MC curve line is crossing MR which means marginal revenues are equal to marginal cost. The firm realizes maximum profit if cost of production is minimum.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

b)

To determine

If the firm earns profit, incur loss or is at BEP when it is at profit maximizing level of output.

b)

Expert Solution

Answer to Problem 1CYU

The firm is at break-even level.

Explanation of Solution

If the firm’s total revenue exceeds total cost then it earns profit whereas if total revenues are equal to total cost then firm is at BEP level. The firm incurs losses if its total cost exceeds total revenues. In the given graph, the firm is at break-even level. This is because the level of output the average total cost and market prices are same.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 58, Problem 1CYU

a)

To determine

The output level at which price taking firm’s profit is maximum.

a)

Expert Solution

Answer to Problem 1CYU

Referring to the graph, profit will be maximum if firm produces 4 quantities.

Explanation of Solution

At quantity 4, the average total cost and marginal cost is minimum which can be seen in the graph shown below:

Krugman's Economics For The Ap® Course, Chapter 58, Problem 1CYU

Optimum level of output is 4 as per the graph because price taking firms produces their products where MR is equal to MC. At this level of output, MC curve line is crossing MR which means marginal revenues are equal to marginal cost. The firm realizes maximum profit if cost of production is minimum.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

b)

To determine

If the firm earns profit, incur loss or is at BEP when it is at profit maximizing level of output.

b)

Expert Solution

Answer to Problem 1CYU

The firm is at break-even level.

Explanation of Solution

If the firm’s total revenue exceeds total cost then it earns profit whereas if total revenues are equal to total cost then firm is at BEP level. The firm incurs losses if its total cost exceeds total revenues. In the given graph, the firm is at break-even level. This is because the level of output the average total cost and market prices are same.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 58, Problem 1CYU

a)

To determine

The output level at which price taking firm’s profit is maximum.

a)

Expert Solution

Answer to Problem 1CYU

Referring to the graph, profit will be maximum if firm produces 4 quantities.

Explanation of Solution

At quantity 4, the average total cost and marginal cost is minimum which can be seen in the graph shown below:

Krugman's Economics For The Ap® Course, Chapter 58, Problem 1CYU

Optimum level of output is 4 as per the graph because price taking firms produces their products where MR is equal to MC. At this level of output, MC curve line is crossing MR which means marginal revenues are equal to marginal cost. The firm realizes maximum profit if cost of production is minimum.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

b)

To determine

If the firm earns profit, incur loss or is at BEP when it is at profit maximizing level of output.

b)

Expert Solution

Answer to Problem 1CYU

The firm is at break-even level.

Explanation of Solution

If the firm’s total revenue exceeds total cost then it earns profit whereas if total revenues are equal to total cost then firm is at BEP level. The firm incurs losses if its total cost exceeds total revenues. In the given graph, the firm is at break-even level. This is because the level of output the average total cost and market prices are same.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 58, Problem 1CYU

a)

To determine

The output level at which price taking firm’s profit is maximum.

a)

Expert Solution

Answer to Problem 1CYU

Referring to the graph, profit will be maximum if firm produces 4 quantities.

Explanation of Solution

At quantity 4, the average total cost and marginal cost is minimum which can be seen in the graph shown below:

Krugman's Economics For The Ap® Course, Chapter 58, Problem 1CYU

Optimum level of output is 4 as per the graph because price taking firms produces their products where MR is equal to MC. At this level of output, MC curve line is crossing MR which means marginal revenues are equal to marginal cost. The firm realizes maximum profit if cost of production is minimum.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

b)

To determine

If the firm earns profit, incur loss or is at BEP when it is at profit maximizing level of output.

b)

Expert Solution

Answer to Problem 1CYU

The firm is at break-even level.

Explanation of Solution

If the firm’s total revenue exceeds total cost then it earns profit whereas if total revenues are equal to total cost then firm is at BEP level. The firm incurs losses if its total cost exceeds total revenues. In the given graph, the firm is at break-even level. This is because the level of output the average total cost and market prices are same.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

Answer 6

Chapter 58, Problem 1CYU

a)

To determine

The output level at which price taking firm’s profit is maximum.

a)

Expert Solution

Answer to Problem 1CYU

Referring to the graph, profit will be maximum if firm produces 4 quantities.

Explanation of Solution

At quantity 4, the average total cost and marginal cost is minimum which can be seen in the graph shown below:

Krugman's Economics For The Ap® Course, Chapter 58, Problem 1CYU

Optimum level of output is 4 as per the graph because price taking firms produces their products where MR is equal to MC. At this level of output, MC curve line is crossing MR which means marginal revenues are equal to marginal cost. The firm realizes maximum profit if cost of production is minimum.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

Answer 7

Chapter 58, Problem 1CYU

a)

To determine

The output level at which price taking firm’s profit is maximum.

Answer 8

a)

Expert Solution

Answer to Problem 1CYU

Referring to the graph, profit will be maximum if firm produces 4 quantities.

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

At quantity 4, the average total cost and marginal cost is minimum which can be seen in the graph shown below:

Krugman's Economics For The Ap® Course, Chapter 58, Problem 1CYU

Optimum level of output is 4 as per the graph because price taking firms produces their products where MR is equal to MC. At this level of output, MC curve line is crossing MR which means marginal revenues are equal to marginal cost. The firm realizes maximum profit if cost of production is minimum.

Answer 13

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

Answer 14

b)

To determine

If the firm earns profit, incur loss or is at BEP when it is at profit maximizing level of output.

b)

Expert Solution

Answer to Problem 1CYU

The firm is at break-even level.

Explanation of Solution

If the firm’s total revenue exceeds total cost then it earns profit whereas if total revenues are equal to total cost then firm is at BEP level. The firm incurs losses if its total cost exceeds total revenues. In the given graph, the firm is at break-even level. This is because the level of output the average total cost and market prices are same.

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.

Answer 15

b)

To determine

If the firm earns profit, incur loss or is at BEP when it is at profit maximizing level of output.

Answer 16

b)

Expert Solution

Answer to Problem 1CYU

The firm is at break-even level.

Answer 17

b)

Expert Solution

Answer 18

b)

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

If the firm’s total revenue exceeds total cost then it earns profit whereas if total revenues are equal to total cost then firm is at BEP level. The firm incurs losses if its total cost exceeds total revenues. In the given graph, the firm is at break-even level. This is because the level of output the average total cost and market prices are same.

Answer 21

Economics Concept Introduction

Introduction: The price taking firms can reduce the cost of production if they produce the correct amount of products. In other words, profit can be maximized if quantity produced at minimum cost.