Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 11Q
To determine
The effect on firm’s
(a) When the product
(b) When the firm’s marginal cost increases.
(c) When the market price falls.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Will a profit-maximizing firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation.
Consider the market for Blackberry cell phones. Assume the market is perfectly competitive and
at a market-clearing equilibrium.
What area represents consumer surplus?
1.) Use the triangle drawing tool to shade in consumer surplus. Label this area 'Consumer
Surplus.
What area represents producer surplus?
2.) Use the triangle drawing tool to shade in producer surplus. Label this area Producer Surplus".
Carefully follow the instructions above, and only draw the required objects.
Price of Blackberry cell phones
Quantity of Blackberry cell phones
Which market offers higher consumer surplus and why? The perfectly competitive firm
or the monopoly firm?
Chapter 6 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
Knowledge Booster
Similar questions
- The left graph shows the world market for wheat. The right graph shows the cost curves and the marginal revenue curve of an individual wheat farmer at the initial long-run equilibrium. The world population increases. In the left graph, draw the new demand curve. Label it. Draw the market supply curve that returns the wheat market to its long-run equilibrium. Label it. Draw a point to show the new long-run equilibrium price and quantity. In the right graph, draw a point to show the firm's price and quantity in the long run. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward= = 41. Suppose that the market for cigarettes is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as P 60Qd; the supply curve can be expressed as P 0.5Qs. Quantity is expressed in millions of boxes per month. What are the amount traded and the price for this market? a) Q = 40; P = 20 b) Q = 20; P = 40 c) Q = 30; P = 30 d) Q = 30; P = 15arrow_forwardSuppose the short run market price a competitive firm faces is Birr 9 and the total cost of the firm is: TC = 200 + Q + 0.02Q 2 . Answer the questions that follow. (A) Calculate the short run equilibrium output and profit of the firm. (B) Derive the MC, ATC, and AVC and calculate the values at the short run equilibrium output. (C) Calculate the producers’ surplus at the equilibrium output. (D) Find the output level that will make the profit of the firm zero.arrow_forward
- Price P MC 2. This will be 2 3. This will be 3 ATC MR Price =MC = Minimum ATC (normal profit) The graph above shows the long-run equilibrium for a competitive market. Assume that in Saudi Arabia, we manage to have pure competition for all goods and services. Assume, in the long-run, we witness the above equilibrium for the entire economy. In terms of welfare outcome, 1. This will be 1 outcome for consumers. outcomes for producers. outcome for the society. The number 1 statement above is true because consumers_4 The number 2 statement above is true because producers 5 The number 3 statement above is true because the society 6arrow_forwardExplain 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_forwardThe hardware industry is perfectly competitive. Currently the price of a hammer is $5 and there is a balance between the number of hammers purchased and the number of hammers manufactured. However, the minimum average total cost of hammers is $7.50. Which of these scenarios is most likely ? Select one: A. Firms will enter the industry and the price will fall to $4 B. Firms will enter the industry and the price will stay at $5 C. Firms will leave the industry but the price will stay at $5 D. Firms will leave the industry and the price will rise to $7.50arrow_forward
- price aggie to d. How much output does each firm produce? e. Calculate each firm's profit. f. Using market demand and supply functions (QD, QS): i. Graphically represent the equilibrium in the market; ii. Calculate producer surplus; and iii. Consumer surplus in this competitive equilibrium.arrow_forwardEvaluate the following statements. If a statement is true, explain why. If it is false, identify the mistake and correct the error. Assume the market is perfectly competitive. A profit-maximizing firm should select the output level at which the difference between the market price and marginal cost is greatest. An increase in fixed cost lowers the profit-maximizing quantity of output produced in the short run.arrow_forwardSuppose the competitive market price is $60, and a competitive firm’s total costs = q^2 - 6q + 990 and marginal cost = 2q - 6. a. Solve for the profit-maximizing (or loss minimizing) quantity (q*). b. What is the market equilibrium price? c. Should the competitive firm produce q*? Explain why using one of the four key questions and solutions. d. Does the competitive firm make a profit? Explain why using one of the four key questions and solutions. e. How much profit (or loss) does the competitive firm make?arrow_forward
- The graph below depicts the cost structure for a firm in a competitive market. Price P4 P3 P₂ P₁ PPPP I MC AVC Q₁ Q₂ Q3 Q4 When prices rise from P2 to P3 the firm finds that: a. marginal cost exceeds marginal revenue at a production level of Q2. b. if it produces at output level Q3 it will earn a positive profit. c. expanding output to Q4 would leave the firm with losses. d. it could increase profits by lowering output from Q3 to Q2. ATC Quantityarrow_forwardPrice The graph shows the market demand and supply curves for wheat, and assume it to be a perfectly (or purely) competitive good. Suppose wheat farmers are earning positive economic profits. Assuming all else remains the same, show how the market responds to this discovery in the graph. Demand Supply Quantityarrow_forwardYou are given the following information for a producer of organic grommets in a perfectly competitive market. TFC $8 Market price = $9 Quantity 1 2 3 4 5 6 MC ($) 8 7 6 8 10 13 The marginal cost of production appears in the table above. What is the profit-maximizing output? Is the firm making a profit or loss? How much? Output: (Click to select) $arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
