Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 8, Problem 4SCQ
Suppose that the market
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The graph shows the demand (D), marginal cost (MC), marginal revenue (MR), and average variable cost (AVC) curves for a firm that is a
price maker for its product. The MC and AVC curves slope upward because of limited space and resources for production activity: To
increase output, the firm must bring older, less-reliable equipment out of storage, pay its workers extra for overtime hours, and so on.
If the firm is able to practice price discrimination, using the two prices indicated by the two points indicated on the demand curve, use
the area tool to outline the region that represents the net revenue (revenue minus production costs, but ignoring fixed costs). The lower
boundary of the region should be slanted.
To refer to the graphing tutorial for this question type, please click here.
Price
MR
MG
D
Quantity
Suppose that the market price increases to $6, as Table shows. What would happen to the profit-maximizing output level?
Using the graph on the next page, do the following problems:
Determine the profit maximizing level of output when the market price for the good is $75/unit. Show this on the graph by making the appropriate drawing (with a straight-edge). Also, write the number (an appropriate estimate should be made) below the graph.
• On the graph, show the maximum total profit that can be generated by the firm based on the market price. Do NOT calculate the value - show the appropriate box on the graph.
Be careful in your (straight) lines. Be clear as to the part of the graph that represents the profit. Use shading as appropriate.
• Below the graph, write the interpretation of the values of the marginal cost (MC) and the average total cost (ATC) at the profit-maximizing level of output; make sure to use all the appropriate names and units. Write the values and interpretations below the graph.
• Answer the following questions:
If the market price of the good falls, the profit maximizing level of…
Chapter 8 Solutions
Principles of Economics 2e
Ch. 8 - Firms ill a perfectly competitive market are said...Ch. 8 - Would independent trucking fit the characteristics...Ch. 8 - Look at Table 8.13. What would happen to the films...Ch. 8 - Suppose that the market price increases to 6, as...Ch. 8 - Explain in words why a profit-maximizing film will...Ch. 8 - A firms marginal cost curve above the average...Ch. 8 - If new technology in a perfectly competitive...Ch. 8 - A market in perfect competition is in long-run...Ch. 8 - Productive efficiency and allocative efficiency...Ch. 8 - Explain how the profit-maximizing rule of setting...
Ch. 8 - A single firm in a perfectly competitive market is...Ch. 8 - What are the four basic assumptions of perfect...Ch. 8 - What is a price taker firm?Ch. 8 - How does a perfectly competitive firm decide what...Ch. 8 - What prevents a perfectly competitive firm from...Ch. 8 - How does a perfectly competitive film calculate...Ch. 8 - Briefly explain the reason for the shape of a...Ch. 8 - What two rules does a perfectly competitive firm...Ch. 8 - How does the average cost curve help to show...Ch. 8 - What two lines on a cost curve diagram intersect...Ch. 8 - Should a firm shut down immediately if it is...Ch. 8 - How does the average variable cost curve help a...Ch. 8 - What two lines on a cost curve diagram intersect...Ch. 8 - Why does entry occur?Ch. 8 - Why does exit occur?Ch. 8 - Do entry and exit occur in the short run, the long...Ch. 8 - What price will a perfectly competitive firm end...Ch. 8 - Will a perfectly competitive market display...Ch. 8 - Will a perfectly competitive market display...Ch. 8 - Finding a life partner is a complicated process...Ch. 8 - Can you name five examples of perfectly...Ch. 8 - Your company operates in a perfectly competitive...Ch. 8 - Since a perfectly competitive firm can sell as...Ch. 8 - Many films in the United States file for...Ch. 8 - Why will profits for films in a perfectly...Ch. 8 - Why will losses for firms in a perfectly...Ch. 8 - Assuming that the market for cigarettes is in...Ch. 8 - In the argument for why perfect competition is...Ch. 8 - The AAA Aquarium Co. sells aquariums for 20 each....Ch. 8 - Perfectly competitive firm Doggies Paradise Inc....Ch. 8 - A computer company produces affordable,...
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