A firm currently faces a market price of $7. If producing output where MC= $7, it would produce 11 units of output. At this level of output, AVC is $7.50 and ATC is $10.25. Which of the following statements is true? a) If the firm produces, it loses $30.25. If the firm shuts down, it loses $35.75. The firm should shut down. b) If the firm produces, it loses $35.75. If the firm shuts down, it loses $30.25. The firm should shut down. c) If the firm produces, it loses $35.75. If the firm shuts down, it loses $30.25. The firm should produce. d) If the firm produces, it loses $30.25. If the firm shuts down, it loses $35.75. The firm should produce.

A firm currently faces a market price of $7. If producing output where MC= $7, it would produce 11 units of output. At this level of output, AVC is $7.50 and ATC is $10.25. Which of the following statements is true? a) If the firm produces, it loses $30.25. If the firm shuts down, it loses $35.75. The firm should shut down. b) If the firm produces, it loses $35.75. If the firm shuts down, it loses $30.25. The firm should shut down. c) If the firm produces, it loses $35.75. If the firm shuts down, it loses $30.25. The firm should produce. d) If the firm produces, it loses $30.25. If the firm shuts down, it loses $35.75. The firm should produce.

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: Price Takers And The Competitive Process

Section: Chapter Questions

Problem 15CQ

See similar textbooks

Similar questions

Suppose that the firm’s demand curve indicates that at a price of $10 per unit, customers will demand 2 million units of its product. Suppose that management decides to pick both price and output; the firm produces 3 million units of its product and prices them at $18 each. What will happen?
Assume a competitive market in which each firm with has a cost function of: 0.2q3 -7.9q2 +181q. Q1: If the current market price is $87 per unit, how many units will this firm provide to the market? Q2: What are the short-run profits of this firm? Q3: What is the long-run market price, and how many units will each firm provide to the market? Q4: IF the demand func. for this market is P(Q)=1169.49-2Q, how many firms will run in this market in the long-run?
True or False: ( ) If MPL is ˃APL, then MPL could be either increasing or decreasing and still ˃ 0 ( ) When ATC ˃ MC, then MC is increasing and then increasing ( ) The producer equilibrium occurs when ISO quant curve crosses ISO cost lime
You are the manager of a firm that sells a “commodity” in a market that resembles perfect competition, and your cost function is C(Q) = 2Q + 3Q2. Unfortunately, due to production lags, you must make your output decision prior to knowing for certain the price that will prevail in the market. You believe that there is a 70 percent chance the market price will be $200 and a 30 percent chance it will be $600. a. Calculate the expected market price. b. What output should you produce in order to maximize expected profits? c. What are your expected profits?
Suppose a firm is currently producing at an output level such that the market price is above the firm's average total cost of producing. Then the firm will earn positive economic profits. Select one: True False
a. At a product price of $56.00 (i) Will this firm produce in the short run? Yes (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? Profit- maximizing output = 8 units per firm (iii) What economic profit or loss will the firm realize per unit of output? Profit per unit = $ 62.96 b. At a product price of $41.00 (i) Will this firm produce in the short run? Yes (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? Profit-maximizing output = 6 units per firm (iii) What economic profit or loss will the firm realize per unit of output? Loss per unit = $ 39 c. At a product price of $32.00 (i) Will this firm produce in the short run? No (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? Non applicable output = 0 units per firm iii) What economic profit or loss will the firm realize per unit of output? Total…
You are a manager at Spacely Sprockets—a small firm that manufactures Type A and Type B bolts. The accounting and marketing departments have provided you with the following information about the per-unit costs and demand for Type A bolts: Materials and labor are obtained in a competitive market on an as-needed basis, and the reported costs per unit for materials and labor are constant over the relevant range of output. The reported unit overhead costs reflect the $10 spent last month on machines, divided by the projected output of 2 units that was planned when the machines were purchased. In addition to the above information, you know that the firm’s assembly line can produce no more than five bolts. Since the firm also makes Type B bolts, this means that each Type A bolt produced reduces the number of Type B bolts that can be produced by one unit; the total number of Types A and B bolts produced cannot exceed 5 units. A call to a reputable source has revealed that unit costs for…
You are the manager of a firm that sells a “commodity” in a market that resembles perfect competition, and your analytics team estimates that your cost function is C(Q) = 2Q + 2Q2. Unfortunately, due to production lags, you must make your output decision prior to knowing for certain the price that will prevail in the market. You believe that there is a 60 percent chance the market price will be $350 and a 40 percent chance it will be $700. a. Calculate the expected market price. b. What ouptut should you produce in order to maximize expected profits? c. What are your expected profits?
Airbus owns 2 plants and has contracted to produce 10 airplanes next year. The cost per airplane at plant 1 is given by 17 + (q1/10) and the cost per airplane at plant 2 is 7 + q2. No matter how Airbus allocates the production of its planes across the 2 plants, it costs at least as much per plane to produce planes at plant 1 as at plant 2. Therefore, Airbus should shut down plant 1. True, false, or uncertain? Explain and show your work.
You are the manager of a firm that sells a “commodity” in a market that resembles perfect competition, and your analytics team estimates that your cost function is C(Q) = 2Q + 3Q2. Unfortunately, due to production lags, you must make your output decision prior to knowing for certain the price that will prevail in the market. You believe that there is a 70 percent chance the market price will be $200 and a 30 percent chance it will be $600. a.Calculate the expected market price. b.What ouptut should you produce in order to maximize expected profits? c.What are your expected profits?
You are the manager of a firm that sells a “commodity” in a market that resembles perfect competition, and your cost function is C(Q) = 2Q + 3Q2. Unfortunately, due to production lags, you must make your output decision prior to knowing for certain the price that will prevail in the market. You believe that there is a 70 percent chance the market price will be $200 and a 30 percent chance it will be $600.a. Calculate the expected market price.$ b. What ouptut should you produce in order to maximize expected profits?unitsc. What are your expected profits?$
Each coffee table produced by Kevin Watson Designer nets the firm a profit of $9. Each book case yields a $12 Profit. Watson's fim is small and it resources limited. During any given production period ( of 1 week ),10 gallons of varnish and 12 lenght of high-quality redwood are available. Each coffee table requires approximately 1 gallon of varnish and 1 lenght of redwood. Each bookcase takes 1 gallon of varnish and 2 lenghts of wood. if the profit for the coffee table is increased from $ 9 to $ 15, what is the new optimal solution? (also, you should show the process of how to get new optimal solution)