Suppose that the market for microwave ovens is a perfectly competitive market. The following graph shows the daily cost curves of a firm operating in this market. icrowave) PRICE (Dollars per 100 90 80 70 60 50 40 30 20 10 0 0 5 MC AVC AC 10 15 20 25 30 35 QUANTITY (Thousands of microwaves) 40 45 50 The area of this rectangle indicates that the firm's used on the vertical and horizontal axes.) Profit or Loss In the short run, at a market price of $35 per microwave, this firm will choose to produce (?) On the previous graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $35 and the firm chooses to produce the quantity you already selected. ✓ would be $ microwaves per day. per day. (Hint: Be sure to take note of the units

Suppose that the market for microwave ovens is a perfectly competitive market. The following graph shows the daily cost curves of a firm operating in this market. icrowave) PRICE (Dollars per 100 90 80 70 60 50 40 30 20 10 0 0 5 MC AVC AC 10 15 20 25 30 35 QUANTITY (Thousands of microwaves) 40 45 50 The area of this rectangle indicates that the firm's used on the vertical and horizontal axes.) Profit or Loss In the short run, at a market price of $35 per microwave, this firm will choose to produce (?) On the previous graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $35 and the firm chooses to produce the quantity you already selected. ✓ would be $ microwaves per day. per day. (Hint: Be sure to take note of the units

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 4.7P

See similar textbooks

Similar questions

If new technology in a perfectly competitive market brings about a substantial reduction in costs of production, how will this affect the market?
Finding a life partner is a complicated process that may take many years. It is hard to think of this process as being part of a very complex market, with a demand and a supply for partners. Think about how this market works and some of its characteristics, such as search costs. Would you consider it a perfectly competitive market?
Why will profits for films in a perfectly competitive industry tend to vanish in the long run?
Based on your answers to the WipeOut Ski Company in Exercise 7.3, now imagine a situation where the firm produces a quantity of 5 units that it sells for a price of 25 each. What will be the companys profits or losses? How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? At the given quantity and price, is the marginal unit produced adding to profits?
A market in perfect competition is in long-run equilibrium. What happens to the market if labor unions are able to increase wages for workers?
Why will losses for firms in a perfectly competitive industry tend to vanish in the long run?
A firms marginal cost curve above the average variable cost curve is equal to the films individual supply curve. This means that every time a firm receives a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the films individual supply curve if marginal costs increase?
Explain how the profit-maximizing rule of setting P=MC leads a perfectly competitive market to be allocatively efficient.
Can you name five examples of perfectly competitive markets? Why or why not?
A computer company produces affordable, easy-to-use home computer systems and has fixed costs of 250. The marginal cost of producing computers is 700 for the first computer, 250 for the second, 300 for the third, 350 for the fourth, 430 for the fifth, 450 for the sixth, and 500 for the seventh. Create a table that shows the companys output, total cost, marginal cost, average cost, variable cost, and average variable cost. At what price is the zero-profit point? At what price is the shutdown point? If the company sells the computers for 500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss. If the firm sells the computers for 300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss.
Will a perfectly competitive market display allocative efficiency? Why or why not?
How would an improvement in technology, like the high-efficiency gas turbines or Pirelli tire plant, affect me lung-nm average cost curve of a firm? Can you draw the old curve and the new one on the same axes? How might such an improvement affect other firms in the industry?