Suppose we have a firm in a perfectly competitive market. Assume that we have the usual shaped cost curves. At a market price of $15 the profit maximizing firm produces 53 units. Something changes that causes the firm to produce a quantity of zero at a price of $15 in the short-run. Which of the changes below can explain the change in the firm's behavior? O An increase in the fixed cost and a decrease in the marginal cost. O An increase in the fixed cost. O An increase in the marginal cost. O A decrease in the market price.
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The price in perfect competition market structure is determined by the market forces of the demand and supply. Price is set in the market and is accepted by the firms.
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- In a perfectly competitive market there is a donut shop that sells 1,200 donuts daily. Each donut sells for the market price of $0.75 and they sell out every day. Assume that this company has labor costs of $275 and materials costs of $400. a. At what price would this donut shop shutdown in the short run? b. Using only variable costs, what is the donut shop’s daily profit? - Now assume that the owner is thinking of adding a second location downtown. The capital investment required is $4,000. The normal rate of return is 5%. c. If the new shop could operate under the same conditions as the original location is it a good business decision to expand?ASAP Does the state of mr=mc in a perfect competitive market mean that the firm is supposed to sell out no matter how much marginal cost they put? Because mr=mc occurs only if the product sells out 100% corresponing to the put marginal cost, right? I also know that the state is occured because the price in a competitive market is fixed, but i wondered if the state means also selling out completely.Consider the following cost information for a firm that operates in a perfectly competitive market. Q (quantity of output) Total cost ($) 0 100 3 140 6 200 9 290 12 410 15 560 18 740 (1) Construct a column for the marginal cost. (2) As the firm increase the output from 9 unit to 12 units, does the marginal product of labor rise or fall? Explain the reason. (3) Suppose that the market price is $50. How many units of output should the firm produce in the short run?
- The following table gives information about a firm’s short-run cost function in a perfectly competitive industry – candy manufacturing. a) What quantity will the firm supply when price of candy is $2? When price is $5? When price is $8? b) Consider the case where price = $2. Suppose that you have been renting capital (a candy-making machine) for a long time under a long-run capital rental agreement, but now the rental contract is about to expire. Should you renew your capital rental contract or not? Explain why or why not. How would your answer change if price is $5? How would your answer change if price is $8? Quantity Total Cost Average Variable Cost Average Total Cost Marginal Cost 0 10 1 15 5 15 5 2 17 3.5 8.5 2 3 18 2.66667 6 1 4 20 2.5 5 2 5 25 3 5 5 6 33 3.83333 5.5 8Suppose a perfectly competitive firm uses labor and capital to produce. In the short run, the quantity of labor is variable and the quantity of capital is fixed. The cost curve estimated by the manufacturer based on capital and labor is: *EQUATION ATTACH AS PHOTO, a. What is the lowest price the manufacturer expects in the long run?b. If factors prices remain constant, what is the lowest product price that firms will continue to operate in the short run?c. If the product price is $120 , how many products will the manufacturer produce in the short run?. A firm in a perfectly competitive industry currently faces a market price of $20 and is maximizing profit by producing 500 units of output at this price. The firm’s total costs are $14,000, of which $5,000 are fixed costs. a) How much profit is the firm making? (Show how you determine this.) b) Should the firm continue to produce in the short run? Explain fully. c) Should the firm continue to produce in the long run? Explain clearly WHY the long run decision may be different than the short run decision, assuming the firm expects no changes in demand conditions.
- New taskFor a producer under complete competition, the following production function applies. Q = F (K, L) = KL where Q is the size of production, K is the size of the capital investment and L is the amount of labor. Assume that the price of capital, r, is 5 and that the salary, w, is 10. a) Assume initially that the capital is locked at 4 units. How much labor will the producer use to produce 50 units of the final product? What will be the total cost of producing these 50 units? b) For the production function above applies The marginal product for work MPL = K The marginal product for capital MPK = L Enter the cost-minimizing combination of capital and labor in the production of 50 units. Also enter the size of the costs. c) Write down the equation for the isocost line for the manufacturerA Milton company works in perfect competition market, its total cost curve in short run is given in this function: TC = 200 − 4Q + 0.5Q2 a. What output level should the firm produce to maximize profit? knowing that averagerevenue is $10. b. What is the firm profit at this level of output?>>>>>>>>>>>>>>>>>>>>>>>>>>>>Suppose the production function for high quality brandy is given by : Q = √KLWhere q is the output of brandy per week and L is labor hours per week ., in the short run K is fixed at 100, so the short run production function is Q = 10√L a. If the capital rents for 10$ and the wage are 5$per hour ., write the short run total cost function. b. How much will the firm produce at a price of 20$ per bottles of brandy ? c. How many labor hours will be hired per week?…Suppose that bicycles are produced by a perfectly competitive, constant-cost industryWhich of the following will have a larger effect the long-run price of bicycles: a government program to advertise the health benefits of bicyclingor (2) a government program increases the demand for steel, an input in the manufacture of bicycles that is produced in an increasing cost industry ? O. Option 1: shifts the demand curve out and increases the price. O. Option 2: shifts the supply curve up and increases the price O. Option 2: it shifts the demand curve up and increases the quantity. O. Option 2: shifts the supply curve up and increases the quantity.
- Explain the average-marginal rule in cost curves? (f) What is the market price? (Assume the firm is operating in a pure competitive market.) (g) If the firm enjoys market power than the firm’s market price will be higher or lower than the competitive market price? Why?a) Suppose in the short-run, the amount of machines she has is fixed at 27. How many mixers should she use? How many baklavas will she produce? How much profit will she make? Using an isoprofit line, as well as the production function, draw a diagram of your solution and label all the intercept and slopes b) In the long-run, how many mixers should she use? How many machines? How many baklavas will she make? c) Suppose that the government decides to provide a $1 subsidy per mixer. What is the profit-maximizing amount of each input to use now?I need help with econ multiple hw questions asap! 56) In a perfectly competitive market, when will the process of entry and exit end for firms in the market? A. when marginal revenue is equal to average variable cost B. when economic profits are zero C. when price is equal to average variable cost D. when marginal revenue equals zero 55) Which of the following measures of cost is best described as “the increase in total cost that arises from an extra unit of production”? A. average total cost B. variable cost C. average variable cost D. marginal cost