1. Explain the relationship between price, marginal revenue and average revenue for a perfectly competitive firm? 2. When does a perfectly competitive firm maximize their profits? What they should do if at their current production level their marginal revenue is greater than marginal cost? 3. Explain the difference between a shut-down decision and exiting decision for a competitive firm? When and how they make such decision? 4. Refer to the graph below: Price MC 16 ATC 11 345 6 18 Duannity In the above graph, assume that the price per unit is $10. Based on this information calculate: a. Profit maximization quantity b. Total revenue at that level c. Total cost at that level d. Profit or loss for this firm (if any)

Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: Firms In Competitive Markets
Section: Chapter Questions
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1. Explain the relationship between price, marginal revenue and average revenue
for a perfectly competitive firm?
2. When does a perfectly competitive firm maximize their profits? What they
should do if at their current production level their marginal revenue is greater
than marginal cost?
3. Explain the difference between a shut-down decision and exiting decision for a
competitive firm? When and how they make such decision?
4. Refer to the graph below:
Price
19
18
MC
16
12
ATC
1 2 3 43 6 1 8 Quantity
In the above graph, assume that the price per unit is $10. Based on this
information calculate:
a. Profit maximization quantity
b. Total revenue at that level
c. Total cost at that level
d. Profit or loss for this firm (if any)
Please refer to the discussion board requirement announcement before posting. First post
due on Thursday, May 6th, and reply to two other student's posts due on Sunday, May
9th.
Transcribed Image Text:1. Explain the relationship between price, marginal revenue and average revenue for a perfectly competitive firm? 2. When does a perfectly competitive firm maximize their profits? What they should do if at their current production level their marginal revenue is greater than marginal cost? 3. Explain the difference between a shut-down decision and exiting decision for a competitive firm? When and how they make such decision? 4. Refer to the graph below: Price 19 18 MC 16 12 ATC 1 2 3 43 6 1 8 Quantity In the above graph, assume that the price per unit is $10. Based on this information calculate: a. Profit maximization quantity b. Total revenue at that level c. Total cost at that level d. Profit or loss for this firm (if any) Please refer to the discussion board requirement announcement before posting. First post due on Thursday, May 6th, and reply to two other student's posts due on Sunday, May 9th.
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