Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Question
Chapter 14.A, Problem 1QE
a)
To determine
The profit-maximizing level of price and output.
b)
To determine
The profit-maximizing level of output and price of a
c)
To determine
Comparison between the results obtained in part (a) and part (b).
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TRUE OR FALSE?
A decreasing cost industry has a long run supply curve that is upward sloping.
Perfect Competition
MC - Marginal Cost
MR - Marginal Revenue
ATC - Average Total Cost
AVC - Average Variable Cost
Refer to the figure above. If this firm decides to operate and is producing the profit-maximizing quantity, then the firm's profit will be:
$40
$0
- $40
$240
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 14 Solutions
Microeconomics
Ch. 14.1 - Prob. 1QCh. 14.1 - Prob. 2QCh. 14.1 - Prob. 3QCh. 14.1 - Prob. 4QCh. 14.1 - Prob. 5QCh. 14.1 - Prob. 6QCh. 14.1 - Prob. 7QCh. 14.1 - Prob. 8QCh. 14.1 - Prob. 9QCh. 14.1 - Prob. 10Q
Ch. 14.A - Prob. 1QECh. 14.A - Prob. 2QECh. 14.A - Prob. 3QECh. 14.A - Prob. 4QECh. 14 - Prob. 1QECh. 14 - Prob. 2QECh. 14 - Prob. 3QECh. 14 - Prob. 4QECh. 14 - Prob. 5QECh. 14 - Prob. 6QECh. 14 - Prob. 7QECh. 14 - Prob. 8QECh. 14 - Prob. 9QECh. 14 - Prob. 10QECh. 14 - Prob. 11QECh. 14 - Prob. 12QECh. 14 - Prob. 13QECh. 14 - Prob. 14QECh. 14 - Prob. 15QECh. 14 - Prob. 16QECh. 14 - Prob. 17QECh. 14 - Prob. 18QECh. 14 - Prob. 19QECh. 14 - Prob. 20QECh. 14 - Prob. 21QECh. 14 - Prob. 22QECh. 14 - Prob. 23QECh. 14 - Prob. 24QECh. 14 - Prob. 25QECh. 14 - Prob. 1QAPCh. 14 - Prob. 2QAPCh. 14 - Prob. 3QAPCh. 14 - Prob. 4QAPCh. 14 - Prob. 5QAPCh. 14 - Prob. 6QAPCh. 14 - Prob. 7QAPCh. 14 - Prob. 1IPCh. 14 - Prob. 2IPCh. 14 - Prob. 3IPCh. 14 - Prob. 4IPCh. 14 - Prob. 5IPCh. 14 - Prob. 6IPCh. 14 - Prob. 7IPCh. 14 - Prob. 8IPCh. 14 - Prob. 9IP
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- A representative firm operates in a competitive industry where the short-run market demand and supply curves are given by QD = 1,410 − 40P and QS = −390 + 20P. a. If the firm's short-run total cost is given by TC = 50 + 2q + 2q^2 what is its short-run profit-maximizing level of output? b. If the firm's long-run total cost given by TC = 50 + 2q + 2q^2 what is its long-run profit-maximizing level of output?arrow_forwardThe canola farming industry is perfectly competitive. Assume that it is in long-run equilibrium at quantity Q0 and price P0. Assume also that it is a constant-cost industry. a) Draw a supply and demand diagram for the canola market showing this equilibrium b.) draw diagram for a typical canola growing farm in its initial long run equilibrium, showing its Marginal Cost, Average Total Cost, and Long Run Average Cost curves. Are there any profits being made by this firm?arrow_forwardConsider a typical firm in a perfectly competitive industry. The firm has a total cost function of TC = 100 + 4q^2 (and thus MC= 8q). If the current market price is 50 then: a. The firm will not shutdown in the short run but will leave the industry in the long run. b. The firm will shutdown in the short run and will leave the industry in the long run. c. The firm will not shutdown in the short run and will stay in the industry in the long run.* ** d. The firm will shutdown in the short run but will stay in the industry in the long run. e. None of the above. Why is the answer C? Please provide explanation of shut down points in the short run and long run with AVC, ATC, etc.arrow_forward
- The data in the table to the right give the total cost, C, and marginal cost, MC, for a profit maximizing firm in a perfectly industry market at each possible level of output, q. (Enter all numeric responses using integers.) What is marginal revenue when the market price is $46? MR = $46. What is marginal revenue when market price is $40? MR = $ 40 What happens to the firm's output choice and profit if the price of the product falls from $46 to $40. If the market price falls from $46 to $40, then the firm's output will from units to units. 06 q 1 23 456 7 9 10 11 C 100 150 178 198 212 230 250 272 310 355 410 475 MC 50 28 20 14 18 20 22 38 45 55 65arrow_forwardin a perfectly competitive market with a constant cost industry, there are currently 100 identical firms, each with the total cost function TC(Q) = Q^2 + 4Q + 36. The market demand is Q = 1800 – 50p. a. What is the price at the short-run equilibrium? What is the net profit/loss of each firm at this price? b. In the long run, how many firms will enter into /exit from the market?arrow_forwardThe information below applies to a competitive firm that sells its output for $45 per unit. When the firm produces and sells 100 units of output, its average total cost is $24.5.When the firm produces and sells 101 units of output, its average total cost is $24.65. Suppose the firm is currently producing and selling 100 units of output. Should the firm increase its output to 101 units? a. Yes, because the marginal revenue exceeds the marginal cost. b. Yes, because the marginal revenue exceeds the average total cost c. No, because the marginal cost exceeds the marginal revenue. d. No, because the average total cost exceeds the marginal revenue.arrow_forward
- In a competitive market, the industry demand and supply curves are P = 70-QD and P = 40+2QS. w. Find the market equilibrium price and output.arrow_forwardIn a competitive market characterized by increasing costs, the long-run industry supply curve gives the minimum long-run average cost of production at various levels of industry output. long-run industry supply curve gives the long-run marginal cost of production at various levels of industry output. long-run industry supply curve is upward sloping. both a and b all of the abovearrow_forwardA perfectly competitive firm faces the short-run cost schedule shown in Table 1. A) Calculate average total cost (ATC=TC/Q), marginal cost (MC=∆TC/∆Q) and marginal revenue (MR=∆TR/∆Q) for each level of output. The price per unit of output is £16. B) Plot ATC, MC and MR on a graph and mark the profit-maximising output. At what output is profit maximised? C) How much profit/loss is made at the optimum level of output?arrow_forward
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