Loose Leaf Microeconomics with Connect Access Card
20th Edition
ISBN: 9781259287084
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 10, Problem 4DQ
To determine
Shutdown point.
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Suppose that the pen-making industry is perfectly competitive. Also suppose that each current firm and any potential firms that might enter the industry all have identical cost curves, with minimum ATC = $1.25 per pen. If the market equilibrium price of pens is currently $1.50, what would you expect it to be in the long run? LO11.2 a. $0.25. b. $1.00. c. $1.25. d. $1.50.
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.
Linda sells 100 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $700. In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her $20 per hour. Linda’s accounting profit is while her economic profit is. LO9.1 a. $700; $400 b. $300; $100 c. $300; negative $100 d. $1,000; negative $1,100
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Loose Leaf Microeconomics with Connect Access Card
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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?arrow_forwardAn economist estimated that the cost function of a single-product firm isC(Q) = 100 + 20Q + 15 Q^2+ 10 Q^3Based on this information, determine: (LO4, LO5)a. The fixed cost of producing 10 units of output.arrow_forwardQuestion 3 The current market price in a competitive industry is $15. Every firm in the industry operates a technology that implies costs described by the function C = 12.5 + 0.3Q2. In the future, the technology is expected to change, and the new cost function will then be C = 10 + 0.2Q2. How much profit is the typical firm making today and in the long run? O. Profit is zero both today and in the long run. O. Profit is 125 both today and in the long run. O. Profit is 175 today and zero in the long run. O. Profit is 250 today and 125 in the long run.arrow_forward
- Quantity Price Total Fixed Costs Variale Cost Total Costs Average Variable Costs Average Total Cost Marginal Cost Total Revenue Marginal Revenue 0 35 25 0 1 35 25 20 2 35 25 25 3 35 25 35 4 35 25 52 5 35 25 80 If this firm produces a quantity of zero units, what is the total profits? What is the firm's marginal cost at a production level of two units? What is the average variable cost at a production level of five units? This firm becomes profitable producing at a quantity of ___ units. The average total cost is smallest at which level of production? At what quantity should this firm produce to maximize their profits based on your calculations? The total costs to produce four units is __________ while the average total cost to produce four units is _________.arrow_forward2. Assume now that the costs of shipping are so large that Australian consumers can buy hand sanitizers from only one designated seller in Australia through both eBay and Amazon and there is no possibility of buying hand sanitizers in person in retail stores or any other online platforms. Explain with the help of a diagram whether this seller would be making a profit or a loss in the short run and in the long-run. Since it is one designated seller selling on two online market platforms (eBay and Amazon) would this be a monopoly or duopoly?arrow_forward5. Consider the marginal revenue and marginal cost curves shown in Figure 7.13. Assume that the firm represented is able to cover its variable costs if it operates in the short run. What is the firm's optimal output level? a. 150 units b. 80 units c. 50 units d. less than 50 units e. between 50 and 80 units Choose and explain your answer above thoroughly--graphical, algebraically, numerically.arrow_forward
- 8. Why can the distinction between fixed costs and variable costs be made in the short run? Classify the following as fixed or variable costs: advertising expenditures, fuel, interest on company-issued bonds, shipping charges, payments for raw materials, real estate taxes, executive salaries, insurance premiums, wage payments, sales taxes, and rental payments on leased office machinery. LO4arrow_forward1. What is the difference between accounting profit and economic profit? How could a firm earn positive accounting profit but negative economic profit? 2. Why is the marginal revenue of a perfectly competitive firm equal to the market price? 3. Would a perfectly competitive firm produce if price were less than the minimum level of average variable cost? Would it produce if price were less than the minimum level of short-run average cost? 4. What is the shutdown price when all fixed costs are sunk? What is the shutdown price when all fixed costs are nonsunk? 10. Explain the difference between the following concepts: producer surplus, economic profit, and economic rent. 9.5. A competitive, profit-maximizing firm operates at a point where its short-run average cost curve is upward sloping. What does this imply about the firm’s economic profits? Briefly explain. 9.8 Dave’s Fresh Catfish is a northern…arrow_forward5. Consider the marginal revenue and marginal cost curves shown in Figure 7.13. Assume that the firm represented is able to cover its variable costs if it operates in the short run. What is the firm's optimal output level? a. 150 units b. 80 units c. 50 units d. less than 50 units e. between 50 and 80 units Choose and explain your answer above thoroughly--graphical, algebraically, numerically. Please use as much detail as possible in the explanation.arrow_forward
- Given the following profit-loss schedule in the short run, how many units should a firm produce? Quantity Marginal Revenue Total Cost Marginal Cost Average Total Cost 0 2 15 - - 1 2 19.75 4.75 19.75 2 2 23.5 3.75 11.75 3 2 26.5 3 8.83 4 2 29 2.5 7.25 5 2 31 2 6.20 6 2 32.5 1.5 5.42 7 2 33.75 1.25 4.82 8 2 35.25 1.5 4.41 9 2 37.25 2 4.14 10 2 40 2.75 4.00 11 2 43.25 3.25 3.93arrow_forwardIn the short run, the marginal cost of the first unit of output is $25, the marginal cost of producing producing the third unit of output is $14. The firm's total variable cost of producing three units of O a. $39. O b. $25 O c. $33.. O d. $57.arrow_forward21. A long-run equilibrium in an industry exists when cost per unit is at its lowest possible level. O. there is only one firm in the industry. O. the size of the market remains constant. O. price equals cost per unit. O. price equals marginal cost. 22. A tariff imposed on a country as a penalty for dumping goods is called a(n) O. antidumping duty. O. quota tariff. O. ad valorem tariff. O. revenue tariff. O. dumping duty.arrow_forward
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