Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 8, Problem 2P
To determine
The features of
Introduction:
Perfect competition: It is a form of the market structure in which there are large number of buyers and sellers which sells homogenous product at uniform price which is determined by the industry.
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(What’s So Perfect About Perfect Competition) Use thefollowing data to answer the questions.Marginal MarginalQuantity Cost Benefit0 — —1 $ 2 $102 $ 3 $ 93 $ 4 $ 84 $ 5 $ 75 $ 6 $ 66 $ 8 $ 57 $10 $ 48 $12 $ 3a. For the product shown, assume that the minimum pointof each firm’s average variable cost curve is at $2. Construct a demand and supply diagram for the product andindicate the equilibrium price and quantity.b. on the graph, label the area of consumer surplus as f.Label the area of producer surplus as g.c. If the equilibrium price were $2, what would be theamount of producer surplus?
Concept: Revenue of a Firm
Farmer Jones grows oranges in Florida. Suppose the market for oranges is perfectly competitive and that the market price for a crate of oranges is $11 per crate.
Fill in total revenue, average revenue, and marginal revenue in the table below. (Enter your responses as integers.)
Average
Marginal
Revenue
Crates of
Market Price
Total Revenue
Revenue
(per crate)
$11
Oranges
(TR)
(AR)
(MR)
$
1
11
$
$
2
11
3
11
4
11
5
11
1.(a) Explain with the help of a graph how a perfectly competitive firm determines its profit-maximizing quantity of output.
(b) Explain with the help of a graph the effect of a decrease in marginalcost on the profit-maximizing quantity of output of a perfectly competitive firm.
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- (a) Define the characteristic of imperfectly competitive market. (b) Explain the condition when an imperfectly competitive firm earns an abnormal profit with the help of graph.arrow_forwardQuestion 3 The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently incurring economic losses. a. How does the price of fertilizer compare to the average total cost, the average variable cost, and the marginal cost of producing fertilizer? b. Draw two graphs, side by side, illustrating the present situation for the typical firm and for the market. [Upload a picture] c. Assuming there is no change in either demand or the firms’ cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied by each firm, and the total quantity supplied to the market.arrow_forwardRevenue and cost (dollars per unit) MC AVC 50 40 30 20 10 10 20 30 40 50 Output (units per day) The above figure illustrates a perfectly competitive firm. If the market price is $40 a unit, to maximize its profit (or minimize its loss) the firm should Select one: a. produce 30 units. b. produce more than 30 units and less than 40 units. c. produce 40 units. d. shut down. e. produce more than 10 and less than 30 units.arrow_forward
- 4. Which formula represents the profits for a firm? (check all that apply) (AC=average cost, MC=marginal cost, AVC=average variable cost, P=price, Q=output, TC=total cost) a. PQ-TC b. PQ-AC c. Q(P-AC) d. P(Q-AC) e. Q(P-MC) f. P(Q-AVC)arrow_forwardShort answer questions a) What are the differences between short run and long run in a competitive market? Note at least two differences with brief descriptions. b) Why do firms under competition have 0 profit in long run? Please give a proper explanation following class notes.arrow_forwardYou are advised to promote perfectly competitive firms in the industry, what would be your arguments. (In terms of main features, profit maximization, loss minimization, etc.) Use diagram.arrow_forward
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