2. Answer the questions below using the cost curves for the price-taking firm shown in the following graph: SMC ATC A Price and cost (dollar) AVC 100 200 300 400 500 600 700 800 900 Output a. If price is $7 per unit of output, draw the marginal revenue curve. The manager should produce units to maximize profit. b. Because average total cost is for this output, total cost is $ c. The firm makes a profit of $ d. At units, profit margin (or average profit) is maximized. Why is this output level different from the answer to part a? e. Let price fall to $3, and draw the new marginal revenue curve. The manager should units to maximize profit. now produce f. Total revenue is now $ and total cost is $ The firm makes a loss of g. Total variable cost is , leaving $ to apply to fixed cost. k. If price falls below! the firm will produce zero output. Explain why. -0 n 4 m 2

2. Answer the questions below using the cost curves for the price-taking firm shown in the following graph: SMC ATC A Price and cost (dollar) AVC 100 200 300 400 500 600 700 800 900 Output a. If price is $7 per unit of output, draw the marginal revenue curve. The manager should produce units to maximize profit. b. Because average total cost is for this output, total cost is $ c. The firm makes a profit of $ d. At units, profit margin (or average profit) is maximized. Why is this output level different from the answer to part a? e. Let price fall to $3, and draw the new marginal revenue curve. The manager should units to maximize profit. now produce f. Total revenue is now $ and total cost is $ The firm makes a loss of g. Total variable cost is , leaving $ to apply to fixed cost. k. If price falls below! the firm will produce zero output. Explain why. -0 n 4 m 2

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 39P: The AAA Aquarium Co. sells aquariums for 20 each. Fixed costs of production are 20. The total...

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