Define normal, inferior and luxury good. Which one has negative income elasticity of demand? B) Explain how the Average Total Cost curve is derived for a competitive firm in the long-run. Also, explain what is economies of scale

Define normal, inferior and luxury good. Which one has negative income elasticity of demand? B) Explain how the Average Total Cost curve is derived for a competitive firm in the long-run. Also, explain what is economies of scale

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter9: Market Structure And Long-run Equilibrium

Section: Chapter Questions

Problem 7MC

See similar textbooks

Related questions

Q: A firm that is losing money should continue to operate in the short run if the ______…

A: The total cost incurred by firms operating in a market includes fixed costs and variable costs.…

Q: Q2 (a). Assume apples are sold in a perfectly competitive market and firms are making zero economic…

A: Perfect competition market refers to a form of market in which there are a large number of buyers…

Q: Consider the following information: TC = 10 + 5Q + Q2 Q = 15 – P Where TC is total cost, Q is the…

A: TC=10+5Q+Q2

Q: Explain the fact that the short-run supply curve for a price taking firm is that segment of its…

A: The short run decisions on production for a perfectly competitive firm has direct implications on…

Q: QUESTION SEVEN The average total cost of producing a commodity is given by ATC = 1000'g + 100 -…

A: As per the policy , we are allowed to solve the first three parts in case multiple sub parts.

Q: The AAA Aquarium Co. sells aquariums for $20 each. Fixed costs of production are $20. The total…

A: Total revenue is the total receipts from sales of the product. Marginal revenue refers to the change…

Q: a) At what output is the firm’s profit maximised and How much profit is made at this output? (b)…

A: 1) Profit = TR -TC Higher the gap between total revenue and total cost, higher will be the profits.…

Q: The coffee industry is comprised of many firms producing an identical product. Market demand and…

A: An industry comprised of many firms producing an identical product ia a perfect competitive…

Q: e shapes of firms' cost curves are important because they help us determine how the firm will…

A: The cost curve is the curve that is a graphical representation of the firm's cost at different…

Q: Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 +…

A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: The accountant of an agricultural company is asked to make a report about the commodities, and…

A: The law of demand refers to the inverse or negative relationship between the quantity demanded of a…

Q: 7. Short-run supply and long-run equilibrium Consider the competitive market for titanium. Assume…

A: In the short run for a firm i the perfectly competitive market, the price they charge for their…

Q: 6. Deriving the short-run supply curve Consider the competitive market for sports jackets. The…

A: A competitive market is one in which numerous producers compete with one another in the hopes of…

Q: Because of increasing marginal cost, most supply curvesA) are horizontal. B) have a negative slope.…

A: The correct answer is option D The increasing marginal cost of the product shows a positive…

Q: A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has…

A: Competitive firm: This firm has no control over a change of market supply or demand.

Q: a. If a competitive firm is making loss in the short run, and it is selling a (100) units of a good…

A: Given: Units sold=100 Selling price=SR 9 AVC=SR 10 Quantity Total Cost Price 1 64 40 2 80 40

Q: Bavarian Crystal Works designs and produces crystal wine decanters for export to international…

A: The equilibrium price and equilibrium quantity of a good sold in the market are determined by the…

Q: Which of the following will cause the purely competitive firm to stop operations? A. the price can…

A: The total cost incurred by firms operating in a market includes fixed costs and variable costs.…

Q: Table) Based on the table, what is the average total product when John's Salsa Company hires three…

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: How many of the following will occur with a linear total revenue curve? (i) A linear cost curve (ii)…

A: Total revenue refers to the value of all the goods and services sold in the market. The total…

Q: 3. ) Ball point pens are produced by a constant-cost industry made up of identical firms with…

A: Competition between firms generally occurs when the market consisted of multiple firms, The…

Q: Graphically explain why the firm’s short-run supply curve is simply the SMC curve. Hint: Explain why…

A: In any firm the short run supply curve is the green line which is positively related to the price of…

Q: State what market structure exists in the housing industry in the UK in the early 1900s. Illustrate…

A: Introduction: Market structure, in financial matters, alludes to how various businesses are…

Q: The term “price taker” can apply to buyers as well as to sellers. A price-taking buyer is a buyer…

A: The goods which have no close substitutes available in the market for which a buyer is a price…

Q: A firm in a perfectly competitive market has an average total cost of $40 for the 100th good it…

A: Answer to the question is as follows:

Q: Describe the difference between average revenue and marginal revenue. Why are both of these revenue…

A: The average revenue is the amount of money a company may make by selling a single unit of their…

Q: Royersford Knitting Mills, Ltd. sells a line of women’s knit underwear. The firm now sells about…

A: Given thatTotal sell-20,000 pair FC Fixed cost=$60,000Average price-$10 each VC…

Q: Mr DIY is a new small scale palm oil supplier. There are many small scale palm oil suppliers in the…

A: Creation of palm oil that conforms to willful maintainability guidelines is developing at a quicker…

Q: Explain the marginal revenue and marginal cost approach to profit maximization and use it to…

A: In a competitive firm, the firm's price equals not only marginal revenue (MR) but also the average…

Q: 6. When new entrants into a competitive market have higher costs than existing firms, Group of…

A: A perfectly competitive market is a market condition where there are large number of buyers and…

Q: Calculate Economic profit and Accounting profit from the figures given below for ABC Company. Total…

A: Answer: Introduction: Accounting profit: Accounting profit refers to the difference between total…

Q: If a firm's revenues do not cover its average variable costs, then that firm has reached its price…

A: The firm earns positive profit if revenues exceed total cost. Firm incurs loss if revenue is less…

Q: A perfectly competitive form sells 40 units of output at the market price of $ 380 per unit . It's…

A: The marginal revenue forms the horizontal straight line which equates the price in the market with…

Q: Please diagram the revenue and profit situation (which would also include the cost curves) for a…

A: If the quantity demand for an item changes dramatically when the price of the good rises or falls,…

Q: Marginal Revenue, Pricing and Elasticity Analysis. (Show your solution) 1. Last year, a toy…

A: Given: A toy truck manufacturer company invested for plastic injection molding machine = $2 million…

Q: Graph represents the cost structure of an individual firm in a perfectly competitive market. If the…

A: A competitive market has numerous number of firms and buyers interplaying with each other for To the…

Q: The figure below depicts the market supply and demand for the perfectly competitive rollerblade…

A: Please find the answer below. PERFECTLY COMPETITIVE: The term perfect competition refers to a…

Q: A perfectly competitive firm maximizes its profit by producing the output at which its marginal cost…

A: "A perfectly competitive firm is a firm which is price taker. In perfectly competitive market there…

Q: Last year, a toy manufacturer introduced a new toy truck that was a huge success. The company…

A: Unit cost is calculated by dividing total cost by total units produced, larger units reduce the cost…

Q: a. What is the firms total fixed cost b. Suppose the price of the product is 20 - What is the…

A: “Since you have posted a question with multiple sub-parts, we will solve the first three subparts…

Q: Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 +…

A: Hi, thank you for the question. As per our Honor code, we are allowed to attempt only the first…

Question

A) Define normal, inferior and luxury good. Which one has negative income elasticity of demand? B) Explain how the Average Total Cost curve is derived for a competitive firm in the long-run. Also, explain what is economies of scale.

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Optimal Price. Last week, Wally's Burgers, Inc. reduced the average price on the 1/2-pound Papa burger by 1%. In response, sales jumped by 2%.A. Calculate the point price elasticity of demand for Papa burgers.B. Calculate the optimal price for Papa burgers if marginal cost is $1 per unit.
A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, average total cost of $8, and fixed cost of $200. What is its profit? What is its marginal cost? What is its average variable cost?
Because of increasing marginal cost, most supply curvesA) are horizontal. B) have a negative slope. C) are vertical. D) have a positive slope.
A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, average total cost of $8, and fixed cost of $200.\a. What is its profit?b. What is its marginal cost?c. What is its average variable cost?d. Is the efficient scale of the firm more than, less than, or exactly 100 units?
Bavarian Crystal Works designs and produces crystal wine decanters for export to international markets. The marketing manager of Bavarian Crystal Works estimates the demand curve for each month to be: P=1,000-0.0025Q Where Q is the number of wine decanters produced monthly. Bavarian Crystal Works also pays a lease for its factory and equipment every month in the amount of $1,000,000. Finally, the cost to produce each wine decanter is $200. What quantity would maximize profits? What is the optimal price for Bavarian Crystals to charge?
In the short run , a profit -maximizing firm will produce additional units of a product as long as- a) price at least covers average fixed cost b) total revenue is increasing c) a change in the rate of technical substitution d) elasticity of demand is infinite e) price at least covers average variable cost
Question 23 A competitive firm has a total cost function in dollars of the form C(q)= 100–4q + q^2, where q is output. Suppose the market price is $10 per unit of output. What is the firm’s short run point elasticity of supply? a) 20/7 b) 5/7 c) 10/7 d) 0.5 e) 2
If Jim’s Home Goods price elasticity of demand is −2, and its profit maximizing price is $6, then its: average cost is $3.00. average cost is $0.33. marginal cost is $3.00. marginal cost is $0.33. average cost is $5.67.
A firm's faces a constant output price of $5. It produces 37 units and incurs a MC of $3. Which of the following is true? Select all that apply. A. The firm is perfectly competitive because it faces a horizontal straight line demand curve. B. The firm is perfectly competitive because it faces a horizontal straight line Average Revenue graph. C. The firm's marginal revenue is $5. D. The firm's Total Revenue equals $185. E. The firm's Total Cost equals $111.
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
If the price in this market is $50, find the profit maximizing output of firm A by explaining the profit maximizing condition for a perfectly competitive firm. Calculate total revenue, total cost, total variable cost and the profit of the firm at the profit maximizing output.
Answer "False" or "True" each of the following. Justify by relying on graphical analysis whenever possible. 1.- A company in perfect competition will maximize profits by equating average income to its marginal cost. 2.- For a company in perfect competition, the demand it faces is equal to the marginal product which is constant. plzz ansr first two