Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 8, Problem 5TY
To determine
Average Revenue, Average Cost and Profit.
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Delvin has a hot dog stand in a busy midtown area with similar stands on every block. The graph above shows the cost curves of Delvin’s Hot Dogs. The market price of a hot dog is $3. Answer the questions below and show all calculations where necessary.
From the diagram, what is Delvin’s profit-maximizing output per day? Explain your answer.
Calculate Delvin’s accounting profit per day.
How will Delvin’s price and profit change in the long-run, assuming no change in technology or demand?
p= 130 - 2Q.
The firm's cost curve is
C(Q) = 20 + 6Q.
What is the profit-maximizing solution?
The profit-maximizing quantity is O. (Round your answer to two decimal places.)
The profit-maximizing price is $. (round your answer to two decimal places.)
What is the firm's economic profit?
The firm earns a profit of $]. (round your answer to two decimal places.)
How does your answer change if C(Q) = 100 + 6Q? The increase in fixed cost
O A. causes the firm to increase both the price and quantity, and profit increases.
O B. has no effect on the equilibrium price and quantity, but profit will decrease.
OC. has no effect on the equilibrium quantity, but the equilibrium price increases and profit increases.
OD. has no effect on the equilibrium quantity, but the equilibrium price increases and profit decreases.
Farmer Brown grows blueberries. The average total cost,
average variable cost, and marginal cost of growing
blueberries for an individual farmer are illustrated in the
graph to the right.
Farmer Brown will incur losses if the market price falls
below $ per crate. (Enter a numeric response using an
integer.)
Furthermore, farmer Brown should shut down in the short
run if the market price falls below $
per crate.
C
Price and cost (dollars per crate)
40-
36-
32-
28-
24-
20-
16-
12-
8-
4
0
MC
AT
AVI
90
10 20 30 40 50 60 70 80
Quantity of blueberries (crates per week)
1
Chapter 8 Solutions
Economics: Principles & Policy
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