LSC CUMBERLAND EC202 MICRO>PKG<
21st Edition
ISBN: 9781260586992
Author: McConnell
Publisher: MCG
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Question
Chapter 10.3, Problem 3QQ
To determine
Maximization of profit.
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In maximizing profits at 9 units of output, this firm is adhering to which of the following decision rules?
Ā a. Produce where MR exceeds MC by the greatest amount.
b. Produce where P exceeds ATC by the greatest amount.
c. Produce where total revenue exceeds total cost by the greatest amount. d. Produce where average fixed costs are zero.
(A) Comment on marginal revenue and marginal cost values when it is given that marginal profit is 0.Ā
(B) Also comment on total profit value of the firm.
(a) Calculate this firmās marginal cost for output level 5.
(b) Calculate this firmās marginal cost for output level 6.
(c) What is the average total cost at which, this firm reaches its break even-point?
(d) What is the average variable cost at which, this firm reaches its shut-down point?
Chapter 10 Solutions
LSC CUMBERLAND EC202 MICRO>PKG<
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- A company has a linear total cost and a linear total revenue, where the slope of the revenue line is greater than the slope of the cost line. How many of the following will allow the firm to reduce the level of their break-even point? (i) Increase their selling price (ii) Increase their output (iii) Increase their fixed costs (iv) Decrease variable costs Ā a.Four b.One c.Two d.Three e.Nonearrow_forwardWhat can we say about the Marginal Revenue = marginal Cost relationship: Multiple Choice A. This is the point where the firm maximizes its profits. B. This is the breakeven point for a firm. C. The firm should shut down if it reaches this point. D. The firm is inefficient at this point. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardMarginal revenue and marginal cost intersect at pointarrow_forward
- If total cost is equal to total revenue, then profit is equal to zero. a. True b. Falsearrow_forwardi. Calculate the marginal cost, marginal revenue and profit for each unit of production.Ā ii. How many units should the firm produce to maximise profit?arrow_forwardHow many of the following will occur with a linear total revenue curve? (i) A linear cost curve (ii) A linear profit curve (iii) A single break-even point (iv) Increasing profits as output increases beyond the upper break-even point Ā a.None b.Four c.Three d.One e.Twoarrow_forward
- If a firm makes zero economicā profit, then the firmA.has total revenues greater than its economic costs.B.must shut down.C.must have no fixed costs.D.has accounting profit equal to their implicit costs.arrow_forwardPrice equals $20, quality equals 400 units, unit cost equals $15, implicit cost equals $4000. What does economic profit equal?arrow_forwardWhen a firm is operating at its minimum efficient scale, its: a. marginal revenue is less than the marginal cost. b. total revenue is just equal to the total cost. c. long-run average cost of production is minimized. d. short-run average total cost of production minimized. e. long-run marginal cost of production is minimized.arrow_forward
- Your company identifies the amount of output where marginal revenue equals marginal cost; at this amount of output, the price is below average total cost but above average variable cost. Your company should expect Select one: 0 0 10 a. to break even or earn a normal profit. b. to take losses, but should continue in operation in order to avoid a greater loss of fixed costs c. to take such large losses that it should cease operations for a while. d. to earn above-normal economic profit.arrow_forwardPrice MC ATC IC MR Quantity a. What area(s) of the graph represent(s) total revenue for this firm if it was profit maximizing? b. What area(s) of the graph represent(s) total cost for this firm if it was profit maximizing? c. What area(s) of the graph represent(s) profits for this firm if it was profit maximizing? d. What area(s) of the graph represent(s) deadweight loss if the firm was profit maximizing?arrow_forwardIf the break-even volume is the quantity for which the overall cost will be considered as Break-even, then, the total revenue does not equal to the total cost. A. True B. False O True O False School plans for set up a summer program for students. The program assessment as follows: 1. fixed costs for classroom and advertisement: $225/program 2. variable costs for handouts: $20/student 3. the program registration fee: $35/student questions: how many students to attend this program for revenue to equal cost? A. 15 B. 40 C. 25arrow_forward
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