EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 10, Problem 3DQ
To determine
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7. Long-run cost relationships
The following graph shows the short-run average total cost curves and the long-run average cost curve for a publishing firm. The five marked
quantities indicate points of tangency between each short-run average total cost curve (SRATC) and the long-run average cost curve (LRAC); for
example, Q₁ marks the point of tangency between SRATC₁ and LRAC.
The orange point on SRATC3 indicates the firm's current output level in the short run (Q3).
COST PER UNIT
SRATC₁
LRAC
SRATC2
|
"
Q₂2₂
SRATC3
O
"
|
1
1
Q3
QUANTITY OF OUTPUT
Q₁
SRATC5
SRATC4
1
The following figure shows the revenue and cost curves for a firm X.
RM
10
a.
b.
C.
7
6
LO
5
4
3.5
0
20 25 30
MC
40
AVC
AC
AR=MR
Units
If a firm X achieves productivity efficiency, what will be the total revenuel
generated
At what price will a firm stop operating? Please explain.
If the market price is RM4.00, what is the total profit or total loss.
4. Various measures of cost
Suppose the imaginary company of Roobek is a small, Jackson-based American apparel manufacturer specializing in athleisure. The following table
presents the brand's total cost of production at several different quantities.
Fill in the remaining cells of the following table.
Quantity Total Cost Marginal Cost
(Pairs) (Dollars) (Dollars)
0
1
2
3
4
LO
5
6
120
200
240
285
340
425
540
Fixed Cost Variable Cost
(Dollars) (Dollars)
Average Variable Cost
(Dollars per pair)
Average Total Cost
(Dollars per pair)
Chapter 10 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
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Similar questions
- Consider the case of a manufacturing company which produces and sells brand pens. The selling price is $20 per pen, the total fixed operating cost is $2 million, and the variable cost per unit is $10, the total fixed financing cost is $500,000. How many pens should the company sells so it would neither make a profit or loss? O a. 4,000,000 O b. 20,000,000 O c. 200,000 O d. 25,000 O e. 2,500,000arrow_forward7. Suppose a firm has only three possible plant-size options, represented by the ATC curves shown in the figure. What plant size will the firm choose in producing (a) 50, (b) 130, (c) 160, and (d) 250 units of output? Draw the firm's long-run average-cost curve on the diagram and describe this curve. LO9.4 ATC 0 M 150 ATC2 ATC₁ ATC3 80 240arrow_forwardIn the table below, the firm; Output Total Revenue Total Cost $0 $30 $60 $90 $120 $150 $180 $25 $49 $69 $91 $117 $147 $180 O a. cannot be in a perfectly competitive industry, because its short-run economic profits are greater than zero. O b. must be in a perfectly competitive industry, because its marginal cost curve eventually rises. O c. cannot be in a perfectly competitive industry, because its long-run economic profits are greater than zero O d. must be in a perfectly competitive industry, because its marginal revenue is constant. 123 456arrow_forward
- Suppose that the paper clip industry is perfectly competitive. Also assume that the market price for paper clips is 2 cents per paper clip. The demand curve faced by each firm in the industry is: LO10.3 a. A horizontal line at 2 cents per paper clip. b. A vertical line at 2 cents per paper clip. c. The same as the market demand curve for paper clips. d. Always higher than the firm’s MC curve.arrow_forwardThe following graph shows the short-run average total cost curves for different plant sizes and the long-run average total cost curve for a publishing firm. The five marked quantities indicate points of tangency between each short-run average total cost (ATC) curve and the long-run average total cost (LRATC) curve; for example, Q1 marks the point of tangency between ATC1 and LRATC. The orange point on ATC3 indicates the firm's current output level in the short run (Q4). ATC, ATC5 LRATC ATC2 ATC, ATC. Q, Q2 OUTPUT In the long run, if the firm decides to keep output at its initial level, what will it likely do? COST PER UNITarrow_forwardScenario 5.1 A dentist's practice is organized as a sole proprietorship. Last year the dentist's tota revenue was $320,000 and total costs were $250,000. The dentist left a job paying $112,000 a year to start the sole proprietorship. Question: According to the information in Scenario 5.1, how much accounting profit did the dentist make last year? O $208,000 O $112,000 O $320,000 O $70,000arrow_forward
- 3. Suppose the doll company American Girl has an inverse demand curve of P = 150 - 0.25Q, where Q measures the quantity of dolls per day and P is the price per doll. There production function equals Q = LO.5KO.5, they pay wages of 35 and they pay capital rates of 140. What is their daily long-run profit at the profit-maximizing output level?arrow_forwardRefer to this table to answer the next three questions. The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Quantity 0 1 2 3 4 Profits are maximized when the firm produces O O O 2 0 1 04 O 3 Total Revenue $0 $6 $12 $18 $24 unit(s). Total Cost $6 $8 $12 $17 $24arrow_forwardCosts of production for each competitive firm is given by: C(q) = 1 + q2. Market demand is Qd = 200 - 5p. What is the number of firms in the long-run equilibrium? O 110 O 150 O 190 210arrow_forward
- The table below shows cost data for WipeOutSki Company which manufactures skis for beginners. If the company's fixed costs are $30, what is the marginal cost of five units of output? Variable Cost Fixed Cost Total Cost Average Variable Cost Average Total Cost Marginal Cost Quantity $30 1 $10 $30 $25 $30 $45 $30 $70 $30 $100 $30 B. $135 $30 O $45.00 O S30.00 O S25.00 2) 3. 4) 69arrow_forwardGraph below shows the cost curves for a perfectly competitive firm (its total fixed costs are $9,000): Revenues, costs 100 90 80 70 60 50 40 30 20 10 0 100 200 300 400 500 600 700 Quantity per period MC 800 AC AVC 900 1000arrow_forward7. A car manufacturer builds both left-hand and right-hand drive cars. It estimates that its costs and the demand faced in each of these respective markets can be modelled by the functions below P1 = 520 – 3Q1 P, = 720 – 4Q2 - TC = 100Q1 + 120Q2 + 4Q1Q2 What is the maximum profit the firm could make? O 24300 O 24800 25300 25800 26500 O0000arrow_forward
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