EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 10, Problem 3RQ
To determine
Perfect competition .
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Consider the following costs for a typical perfectly competitive firm with no fixed costs (average total cost = average variable cost).
Average Total
Cost
Quantity
Marginal Cost
$24
1.
16.5
6$
12.67
3.
7.
15
11.25
12
5.
14.83
9.
a. Which of the following prices would be associated with a long-run equilibrium?
O $11.25
O $15
O $12
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Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
Refer to Figure 14-1. If the market price falls below $6, the firm will earn
O a. positive economic profits in the short run.
O b. negative economic profits in the short run but remain in business.
O c. negative economic profits in the short run and shut down.
O d. zero economic profits in the short run.
PRICE
20
18
16
14
13
10
8
6
4
2
MC
1
2
3
QUANTITY
4
ATC
AVC
5
Chapter 10 Solutions
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- 34. How do i solve this questionarrow_forwardPrice and costs (dollars) 20 10 L O 10 20 MC O always. ATC MR 40 30 Quantity (per day) The figure above shows a perfectly competitive firm. In the short run, the firm will shut down only if the AVC of producing 10 units is more than $20. only if the AVC curve reaches its minimum before 10 units are produced. only if the AVC of producing 10 units is less than $20.arrow_forwardComplete the table above. Graph AVC , ATC, and MC on the same graph. Suppose market price is $30. How much will the firm produce in the short run? How much are total revenue? Suppose market price is $50. How much will the firm produce in the short run? What are total profits?arrow_forward
- Consider the following data facing a perfectly competitive firm: price = $20, quantity of output produced = 600 units, average total cost = $16, average fixed cost = $12, and marginal cost = $22. This firm should O a. increase output to maximize profit. O b. not change output in the short run since profit is already maximized. O c. shut down immediately. O d. reduce output but not shut down in the short run to maximize profit. O e. raise price above $20 to maximize profit in the short run.arrow_forwardMC ATC AVC 23 22 16 MR 12 11 14 17 19 Quantity (units) Consider the perfectly competitive firm in the above figure. At what price will long-run equilibrium occur? Select one: O a. $23 O b. $22 O c. $11 O d. $12 Price (dollars per unit)arrow_forwardA perfectly competitive firm that makes car batteries has total fixed costs of $10,000 per month. The market price at which it can sell its output is $100 per battery. The firm's minimum AVC Is $105 per battery. The firm is currently producing 500 batteries a month (the output level at which MR=MC). This firm is making a O loss, shut down O profit, shut down O profit: increase O loss; increase and should. productionarrow_forward
- 8.6arrow_forwardAssume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, marginal cost exceeds this firm's price. Assuming price exceeds average variable cost, to maximize profits Cathy's should O a. stop producing since it is earning a loss. O b. decrease their output. Oc make no adjustments as they are already maximizing their profits. Od. increase their output. Both Stan and Kyle own potato chip factories. Stan's factory has low fixed costs and high variable costs. Kyle's factory has high fixed costs and low variable costs. Currently, each factory is producing 5.000 bags of potato chips at the same total cost. Complete the following statement with the correct answer. If each produces more, the costs of Kyle's factory will exceed those of Stan's factory. Ob. more, their costs will be equal. less, the costs of Kyle's factory will exceed those of Stan's factory. Od. less, their costs will be equal. If a firm is producing where…arrow_forwardSuppose 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?arrow_forward
- Consider the following graph of the average and marginal cost functions for a firm in a perfectly competitive market. At a price of P=10: (iii) the marginal cost of production is . (iv) the firm's total profit is . (v) the firm's variable profit is .arrow_forwardWhich of the following is directly implied by an industry having many small firms producing homogeneous goods? O a. each firm in the market is a price taker Ob.each firm in the market will earn zero economic profit in the long run Oc each firm in the market will earn zero economic profit in the short run Od. each firm in the market will earn losses due to excessive entry by new firms O e. each firms sells output at the same pricearrow_forward13 Suppose that Maggie's Farm Organics, a perfectly competitive firm, is producing an Output equal to 8,000 pounds of tomatoes. At this Output level, it finds that its Marginal Revenue (MR) equals $3.00 and that its Marginal Cost equals $2.00. Given this information, Maggie's Farm should: i of Select one: a. shut down. b. increase its Price. C. increase its Output. d. decrease its Output.arrow_forward
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