Use the following graph to answer parts (a)-(e). Prices and costs are in dollars. 30 /MC ‚ATC 27 24 18 15 12 6 3 4 8 12 16 20 24 28 32 36 40 `MR Quantity The graph above shows the demand (D), marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves for one of many profit-maximizing firms operating in the short run in an industry in which there are no barriers to entry. Each firm sells a similar but not identical product. (a) What will happen to total revenue if the firm raises the price from $9 to $12? Explain. (b) At 16 units, is the firm producing at the allocatively efficient quantity? Explain. (c) If the firm produces 12 units, will the firm's economic profit be positive, negative, or zero? Explain. (d) Use the relationship between the margi cost curve and the average total cost curve to explain why the average total cost curve is increasing at 20 units. (e) Calculate the consumer surplus if the firm charges the profit-maximizing price. Show your work. Price, Cost
Use the following graph to answer parts (a)-(e). Prices and costs are in dollars. 30 /MC ‚ATC 27 24 18 15 12 6 3 4 8 12 16 20 24 28 32 36 40 `MR Quantity The graph above shows the demand (D), marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves for one of many profit-maximizing firms operating in the short run in an industry in which there are no barriers to entry. Each firm sells a similar but not identical product. (a) What will happen to total revenue if the firm raises the price from $9 to $12? Explain. (b) At 16 units, is the firm producing at the allocatively efficient quantity? Explain. (c) If the firm produces 12 units, will the firm's economic profit be positive, negative, or zero? Explain. (d) Use the relationship between the margi cost curve and the average total cost curve to explain why the average total cost curve is increasing at 20 units. (e) Calculate the consumer surplus if the firm charges the profit-maximizing price. Show your work. Price, Cost
Chapter6: Proudction Costs
Section: Chapter Questions
Problem 8SQP
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Please answer (d) and (e) and show the answer with graphs.
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