Refer to the above graph for a purely competitive firm in the short run. What minimum output level should the firm produce just for it to break even?
Q: Determine and explain the profit maximization output of a perfectly competitive firm.
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A: The MC above the minimum point of AVC is called supply.
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A: Answer - Price Taker Firm - The price taker firm are those firm who has not the ability to influence…
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Q: Under what conditions should a competitive firm shut down in the short run?
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A: Here, MC= marginal cost MR = marginal revenue MR'=new marginal revenue D= demand of goods D'= new…
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Q: why does a purely competitive firm not charge a price below the market price?
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A: At profit maximization, MR = MC and price is determined by the demand curve.
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Q: the profit maximization condition for a perfectly competitive firm in the short-run- is
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Q: Why is the marginal revenue curve for a perfectly competitive firm the same as its demand curve?
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Q: Explain how the perfectly competitive firm decides whether to operate or shutdown in the short run.
A: There are mainly two types of costs in the process of production.
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- Now suppose firm X undertakes a process innovation that reduces its marginal cost ofproduction from $20 to $15. The fixed cost of undertaking this process innovation is F > 0. Is this atough commitment or a soft commitment? Why? For what values of F would it make sense for firm Xto make this commitment?4. Assess which of the following is true and which is false.A firm’s profit equation is given by π = -100 + 160Q – 20Q2. Therefore,a) The firm’s fixed cost is 100.b) The firm’s fixed cost is 40 and variable cost is 20.c) Marginal profit is Mπ = 160 – 20Q.d) The firm’s profit-maximizing output is Q = 4.e) Marginal profit is Mπ = 160 – 40Q and it is positive for quantities that are lower than theprofit-maximizing quantity.A 62 metre length of rope is cut into pieces whose lengths are in arithmetic progressionwitha common difference of d metres. Given that the lengths of the shortest and thelongest pieces are 0.5 and 3.5 metres respectively, find d.(C) For a firm’s product, the demand function isp = 72 2 0.04qand the average cost function isc¯ =500q+ 30 At what level of output would profit be maximized?
- Suppose a food company has both food and store divisions. The food divisionproduces burgers that are sold downstream at the store. Assume that the storesells 1,000 burgers at $10, 2,000 burgers at $9, 3,000 at $8, and so on up to10,000 burgers at $1. The price the food division charges for a burger is$3.50. What will be the profit-maximizing price for the entire company? How muchprofit will the company make? What is the revenue-maximizing quantity for thestore?Suppose that the steel firm’s costs are shown below: Complete the table and determine the optimal output to be Price of steel is P175 per unit. Output (Q) TFC TVC TC MC TR MR Profit/Loss 0 500 0 1 500 50 2 500 90 3 500 140 4 500 200 5 500 270 6 500 350 7 500 450 8 500 600 9 500 800PakPerfect Inc. estimates equation of its total costs of production as TC = 500 + 10Q + 5Q2 and market demand for its product as Qd = 105 – (1/2) P, where Q is quantity in units and P is price in Pak$. (i) Write the equations of the firm’s costs, as a function of Q (ii) Average Total Cost ATC (iii) Average Variable Cost AVC (iv) Average Fixed Cost AFC a. Given above costs can you determine what will be the firm’s production in Stage 1? What is the breakeven price and breakeven quantity for this firm? b. What is the shutdown price and quantity for this firm? c. Draw the firm’s costs in a graph as per your determination in (a). Label the breakeven and shutdown price and quantity using information in (b) and (c) above. d. Given the market price of Pak$ 50 (i) how many units should the firm produce? (ii) how many firms are competing in this market in short-run? (iii) How many firms will be in the industry in the long-run? e. How do you interpret the profit or loss condition of PakPerfect?…
- PakPerfect Inc. estimates equation of its total costs of production as TC = 500 + 10Q + 5Q2 and market demand for its product as Qd = 105 – (1/2) P, where Q is quantity in units and P is price in Pak$. a- Write the equations of the firm’s costs, as a function of Q: Average Total Cost ATC Average Variable Cost AVC Average Fixed Cost AFC b- Given above costs can you determine what will be the firm’s production in Stage 1? c- What is the breakeven price and breakeven quantity for this firm?Suppose a perfectly competitive firm is operating in short run. The information of MR, Q,ATC and AVC are 15 taka, 60 unit, 45taka and 35 taka respectively. Calculate firm’sprofit/loss and total fixed cost. From these calculations and based on all the giveninformation, can you conclude about the firm’s decision in short run? Explain your reasoningwith the help of a suitable diagram. Show all the relevant information in yourdiagram.[Q=profit maximizing output and MR=marginal revenue]A company manufacturing laundry sinks has fixed costs of $100 per day but has totalcosts of $2,500 per day when producing 15 sinks. The company has a daily demand functionof q = 360 − p, where q is the number if laundry sinks demanded and p is te price ofa laundry sink. ) If production increases continuously, what is likely to be the average cost per sink? How many laundry sinks will the company need to produce in order to maximise it′s profits? What is the maximum profit?
- Yennefer produces spells. Suppose q is the quantity of spells produced. Her Total Costs are given byTC(g)=171+g^2 and her Marginal Costs are given by MC(g)=2q. What is her minimum AverageTotal Cost?A local microbrewery has total costs of production given by the equation TC=500+10q+5q2. This implies that the firm's marginal cost is given by the equation MC=10+10q (you do not need to be able to show this). The market demand for beer is given by the equation QD=105 – (1/2)*P. a) Write the equations showing the brewery's average variable cost.Explain what side of the profit-max vs. win-max argument is supported by the Leach & Szymanski (2015). What is the logic behind their argu- ment?