ume that the following data is for a profit-maximizing manufacturer: antity $ Total Cost 100 140 160 190 240 300 370 450 550 er to the above information to answer this question. What is the value of the shut-down price? hint - What are the fixed costs? What are the Variable cost values? ect one: a. $60. b. $40. c. $50. d. $30. e. $20.
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- Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + q2 Marginal cost: MC = q where q is an individual firms quantity produced. The market demand curve for this product is Demand:QD = 120 P where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market. a. What is each firms fixed cost? What is its variable cost? Give the equation for average total cost. b. Graph average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity? c Give the equation for each firms supply curve. d. Give the equation for the market supply curve for the short run in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market in the short run? f. In this equilibrium, how much does each firm produce? Calculate each firms profit or loss. Is there incentive for firms to enter or exit? g. In the long run with free entry and exit, what is the equilibrium price and quantity in this market? h. In this long-run equilibrium, how much does each firm produce? How many firms are in the market?Using the table (Check if the values are correct), answer the questions below: a. What is the firms total fixed cost b. Suppose the price of the product is 20 - What is the firms output level? - What is its profit (or loss)-per-unit at that output level? $ - What is its total profit? $ c. Now suppose the price of the product is $10. - What is the firm’s profit-maximizing output level? - What is the firm's profit or loss per-unit? $ - What is the firm's total profit (or loss)? $ d. At a price of $10, will the firm produce? e. If the price remains $10, what will happen to this firm in the long-run?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?
- . 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.Modified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true. f. In the long run, if price is below average total cost, then it pays to just shut down.Imagine that you are a price-taking firm with the following total cost schedule. Q 1 2 3 4 5 6 7 8 9 TC 12 20 24 28 34 42 52 64 78 Assume that if this firm produces zero they have a total cost of zero. (That is in italics because it's important..... Notice that this is a problem we have done before except for a little twist. Can you notice what it is?) Another way of saying that is that there is no fixed cost. Fill in the following supply schedule. (Enter only integers.) (If you don't know what I'm talking about, pleeeeeease go back and figure out what supply means before you try to answer!) P QS 4 ? 6 ? 8 ? 10 ? 12 ? 14 ?
- Should a firm shut firm if its revenue is R = $1,500 per week and: a. Its variable cost is VC = $1,100 and its sunk fixed cost is F = $800? b. Its variable cost is VC = $1,600 and its fixed cost is F = $600? c. Its variable cost is VC = $1,100 and its fixed cost is F = $1000 ($800 of which is avoidable if it shuts down)?a. Are the following statements true or false? Explain your reasons. For a firm with price in excess of average total cost, the presence of economic profits implies that the firm should increase output in the short run even if price is below marginal cost. If marginal cost is rising with increasing output, average cost must also be rising. Fixed cost is the same at each output level except when no output is produced. When a firm produces no output, there are no fixed costs. b. Allsmart’s demand curve is given by Q=10-P for its dishwashers. The marginal and average cost is $3 per dishwasher produced. Complete the following table.Explain the fact that the short-run supply curve for a price taking firm is that segment of its marginal cost (MC) curvethat lies above the average variable cost curve?
- Consider the following cost information for a firm that operates in a perfectly competitive market. Q (quantity of output) Total cost ($) 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 graph shown below is that of Do Drop In, a shop in the dry-cleaning industry. a) At the optimal output, what price will Do Drop In charge and what will be its output? Price: $ Output: units b) At the optimal price and output, what will be its total revenue, total cost, and total loss? TR: $ ; TC: $ Total loss: $ c) If this firm made a rational decision to continue to produce, despite the loss, average variable cost must be below what level? AVC must be less than $ .a. Why is the marginal revenue of a perfectly competitive firm equal to the market price? b. Would a perfectly competitive firm produce if price were less than the minimum level of average variable cost? Why?