Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 8, Problem 8P
To determine
Whether a firm should continue its production or shut down in various conditions mentioned in sub parts.
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Question 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.
1. The accompanying graph
summarizes the demand and costs
for a firm that operates in a perfectly competitive market.
a. What level of output should this firm produce in the short run?
b. What price should this firm charge in the short run?
c. What is the firm's total cost at this level of output?
d. What is the firm's total variable cost at this level of output?
e. What is the firm's fixed cost at this level of output?
f. What is the firm's profit if it produces this level of output?
g. What is the firm's profit if it shuts down?
h. In the long run, should this firm continue to operate or shut down?
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13. Firms in Competitive Markets
The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently making economic losses.
Which of the following statements is true about the price of fertilizer? Check all that apply.
The price of fertilizer must be less than average total cost.
The price of fertilizer must be less than marginal cost.
The price of fertilizer must be equal to average variable cost.
The following graphs show the cost curves faced by a typical firm, the demand for fertilizer, and possible price and supply curves.
Prics and Cast
MC
Firm
Demand
Quantity
Market
Quantity
(?)
If firms in the market are producing output but are currently making economic losses,
market, and indicates the corresponding supply curve.
illustrates the present situation for the typical firm in the
Assuming there is no change in either demand or the firm's cost curves, which of the following statements is true about what will happen in the long
run? Check…
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