Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 6, Problem 7P
(a)
To determine
Fixed and marginal cost for producing 1 unit.
(b)
To determine
Short-run price at which one unit is supplied by the firm.
(c)
To determine
Long-run prices when firms are free to enter and exit
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Students have asked these similar questions
Suppose that each firm in a competitive industry
has the following costs:
Total cost: TC=50 + 1/2q^2
Marginal cost: MC=q
where q is an individual firm's quantity produced.
The market demand curve for this product is
Demand: QD = 120 - P
where P is the price and Q is the total quantity of
the good. Currently, there are 9 firms in the
market.
a. What is each firm's fixed cost? What is its
variable cost? Give the equation for average total
cost.
a) A profit-maximizing business incurs an economic loss of $10,000 per year. Its fixed cost is $15,000 per year. Should it produce or shut down in the short run? Should it stay in the industry or exit in the long run? b) Suppose instead that this business has a fixed cost of $6,000 per year. Should it produce or shut down in the short run? Should it stay in the industry or exit in the long run?
Good Grapes is selling grapes in a purely competitive market. Its output is 5,000 pounds, which it sells for $5 a pound. At the 5,000-pound level of output, the average variable cost is $4.00, the marginal cost is $4.25, and the average total cost is $4.50 a pound. Should the firm increase output, decrease output, or not produce? Why? How should the firm determine the optimal level of output?
Chapter 6 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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