Gen Combo Microeconomics; Connect Access Card
21st Edition
ISBN: 9781260044874
Author: MCCONNELL CAMP
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 2P
To determine
Average Total Cost .
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
If there were 30 firms in this market, the short-run equilibrium price of copper would be______ per pound. At that price, firms in this industry would . Therefore, in the long run, firms would _______ the copper market.
Because you know that competitive firms earn_____ economic profit in the long run, you know the long-run equilibrium price must be__________
per pound. From the graph, you can see that this means there will be _______ firms operating in the copper industry in long-run equilibrium.
True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit.
True
False
Assume that a firm in a perfectly competitive industry has the following total cost schedule:
Calculate a marginal cost and an average cost schedule for the firm to complete the following table.
Output
Total Cost
Marginal Cost
Average Cost
(units)
($)
($)
($)
10
440
15
600
20
720
25
900
30
1,200
35
1,540
40
1,920
If the prevailing market price is $68 per unit, units will be produced. Profits per unit will be and total profits will be .
Is the industry in long-run equilibrium at this price?
No
Yes
Assume that prior to the outbreak of the coronavirus (Covid-19), the natural gas industry was in Long Run Equilibrium (LRE).
Using our side-by-side graph, depict the market equilibrium P0 and Q0, the optimal output of an individual firm representative of the other firms in the industry at this LRE (labeled as q0), and the individual firm’s profit if any.
Provide a brief narrative explaining the setting and the profitability of an individual firm in an LRE (including why there is a certain level of profit in this setting).
assume the natural gas industry is perfectly competitive, demand is downward sloping, supply is upward sloping, and production technology results in traditional U-shaped ATC and AVC curves.
market price is always greater than the minimum of the AVC curve.
Chapter 11 Solutions
Gen Combo Microeconomics; Connect Access Card
Knowledge Booster
Similar questions
- If there were 20 firms in this market the short run equilibrium would be $___ per pound. At this price firms in the industry would _____. Therefore in the long run firms would _____ the titanium market. Because you know that competitive firms earn ___ economic profit in the long run , you know the long run equilibrium Price must be $__ per pound. From each graph you can see that this means there will be __ firms operating in the titanium industry and long run equilibrium. True or false assuming implicit cost are positive each of the firms operating in industry in the long run earns negative accounting profit.arrow_forwardThe coffee industry is comprised of many firms producing an identical product. Market demand and supply conditions are indicated in the left-hand panel of the figure below; the long-run cost curves of a representative coffee farmer are shown in the right-hand Currently, the market price for coffee is $2 per pound, and at that price consumers are purchasing 800,000 pounds of coffee per day. Using the graphs shown in the images find:a. How many pounds of coffee will each farmer produce if they want to maximize profits?b. How many farmers are currently serving the industry (fractional numbers are fine)?c. In the long run, what will the equilibrium price of coffee be? Briefly explain your answer.arrow_forwardIf there were 20 firms in this market, the short-run equilibrium price of copper would be ______________ per pound. At that price, firms in this industry would ____________ . Therefore, in the long run, firms would ____________ the copper market. Because you know that perfectly competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be _____________ per pound. From the graph, you can see that this means there will be ___________ firms operating in the copper industry in long-run equilibrium. True or False: Each of the firms operating in this industry in the long run earns negative accounting profit.arrow_forward
- Suppose that the perfectly competitive firm with the costs and revenues shown in the figure to the right is contemplating whether or not to produce 12 units of output. If the firm were to produce the 12th unit and, in doing so, increase its hourly total costs to $68 from $56, what would be its marginal cost? Would producing 12 units maximize the firm's profits? What would be the firm's total revenues per hour? What would be its hourly economic profits? If it were to produce the 12th unit, the firm's marginal cost would be MC = $ nothing per unit. Since the market price is P = $ nothing per unit and this price ▼ is larger than equals is less than the firm's marginal revenue, marginal cost ▼ is less than is larger than equals marginal revenue, and producing the 12th unit ▼ would would not satisfy the profit-maximizing rule. The firm's total revenue would equal $ nothing per hour and economic profits would equal $ nothing per hour. (Enter your responses as whole…arrow_forwardSuppose that each firm in a competitive industry has the following as the Total cost: TC=50+ ½q2 Where q is an individual firm’s quantity produced. The market demand curve for this product is Demand: Q = 120 – P Where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market What is each firm’s fixed cost? What is its variable cost? At what quantity efficiency of scale would be achieved? Give the equation for each firm’s supply curve Give the equation for the market supply curve for the short run What is the equilibrium price and quantity for this market in the short run? In this equilibrium, how much does each firm produce? Is there incentive for firms to enter or exit? In the long run with free entry and exit, what is the equilibrium price and quantity in this market? In the long-run equilibrium, how many firms are in the market?arrow_forwardSuppose that each firm in a competitive industry has the following as the Total cost: TC=50+ ½q2 Where q is an individual firm’s quantity produced. The market demand curve for this product is Demand: Q = 120 – P Where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market What is each firm’s fixed cost? What is its variable cost? At what quantity efficiency of scale would be achieved? Give the equation for each firm’s supply curve Give the equation for the market supply curve for the short run What is the equilibrium price and quantity for this market in the short run? In this equilibrium, how much does each firm produce? Is there incentive for firms to enter or exit? In the long run with free entry and exit, what is the equilibrium price and quantity in this market? In the long-run equilibrium, how many firms are in the market? I want the subparts 4,5,6 to be solved. Thank youarrow_forward
- 13. Suppose a representative firm in a perfectly competitive industry has the following total cost of production in the short run: TC=Q3-60Q2+1200Q. What will be the long run equilibrium quantity for the firm? What will be the long run equilibrium price in this industry? Let the industry demand be given by QD=10800-4P. How many firms will be active in the long-run equilibrium? Suppose the firm faces a positive demand shock that increases the industry demand to QD=13500-4P. What will be the new equilibrium number of firms in the market assuming that the industry is a constant cost industry?arrow_forwardOutput and Cost Information Output Total Fixed Cost Total Variable Cost 1 $20 $30 2 $20 $70 3 $20 $100 4 $20 $120 5 $20 $180 6 $20 $268 The table above provides information for a firm in a purely competitive industry. The table above provides information for a firm in a purely competitive industry. Every firm in this industry has the same cost structure as above. From what you know about these firms’ cost structures, the highest possible price per unit that could exist as the market price in long-run equilibrium in this industry is $____________.arrow_forwardModified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true. The shapes of long-run cost curves follow directly from the assumption of a fixed factor of production, which implies diminishing returns. The optimal scale of plant is the scale of plant that maximizes average cost. In the long-run competitive equilibrium, each individual firm chooses a scale of operations that minimizes its long-run average cost. Answer correctly and explain within 30mins will give you positive feedback.arrow_forward
- 2) Cost functionsConsider the following total cost function for an individual firm: C(q)= 10 +q + ¼ q^2 a- At what level of output is average cost at its lowest?b- Draw a graph showing firm average cost against quantity.c- Suppose that there is an industry with two identical firms, with this cost function. What is the industry total cost curve? What is the industry marginal cost curve?d- Suppose these two firms together act in a perfectly competitive manner. What is the price level in the case where these firms act perfectly competitively? What are the profits of the firms given perfectly competitive pricing?arrow_forwardAssume that the gold-mining industry is perfectly competitive. a) Illustrate a long-run equilibrium using diagrams for the gold market and for a representative gold mine. b) Suppose that an increase in jewelry demand induces a surge in the demand for gold. Using your diagrams, show what happens in the short run to the gold market and to each existing gold mine. c) If the demand for gold remains high, what would happen to the price over time? Specifically, would the new long-run equilibrium price be above, below, or equal to the short-run equilibrium price in part b)? 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_forwardAssume a competitive industry is initially at its long-run equilibrium, given the inverse market demand and supply functions: P = 25000 − 0.2Qd and P = 5000 + 0.3Qs If all current firms in this market have identical cost structures and produce 50 units at their break-even point: 1- How many firms operate in this market at this point? 2- What is the profit maximizing quantity produced by each competitive firm? Now, assume that the inverse demand for this product increases to P = 35000 − 0.2Qd, which leads to an entry of and additional number of firms whose cost structures are also identical to those who existed in the market before the increase in the demand. If the new long-run equilibrium price after both changes is 20000 cents: 3- How many new firms entered this market? 4- What is the value of the elasticity of supply at long-run market equilibrium? 5- Draw a fully-labeled graph that demonstrated the above changes at the firm and market levels, highlighting the long-run industry…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning