Microeconomics with Connect Access Card
20th Edition
ISBN: 9781259278556
Author: Campbell McConnell
Publisher: McGraw-Hill Education
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Chapter 11, Problem 2RQ
To determine
Average Total Cost .
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A firm sells its product in a perfectly competitive market where other firms charge a price of $110 per unit. The firm estimates its total costs as C(Q) = 70 + 14Q + 2Q2. (LO3) b. What price should the firm charge in the short run? c. What are the firm’s short run profits? d. What adjustments should be anticipated in the long run?
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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Microeconomics with Connect Access Card
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- An 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_forwardQuantity Price 0 20 1 18 2 16 3 14 4 12 5 10 Are the price and quantity combinations above for a perfectly competitive industry? Select one: O a. No, they are not because the demand curve should be perfectly elastic. O b. No, because the quantities are too low. O c. Yes, they are because the demand curve is downward sloping. O d. Yes, they are because the price falls the same amount for each increase in quantity. 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_forwardSuppose you are a perfectly competitive firm producing computer memory chips. Your production capacityis 1000 units per year. Your marginal cost is $10 per chip up to capacity. You have a fixed cost of $10,000 ifproduction is positive and $0 if you shut down. What are your profit-maximizing levels of production andprofit if the market price is ( a ) $5 per chip, ( b ) $15 per chip, and ( c ) $25 per chip? For case ( b ), explainwhy production is positive even though profits are negative?arrow_forward
- Consider a set of 1000 companies operating in a competitive market. The supply curve for this market is given by O = 20+2P and the demand curve is given by D = 280-4P, where quantity Q is measured in millions of tons and Price P is measured in monetary units. Considering that the marginal cost of the individual firm is given by 2Q, the quantity Q being measured in thousands of tons, we ask: a) Sketch the market equilibrium and the equilibrium of an individual firm. b) What is the situation of this market at that particular moment. c) Make considerations about the long-run equilibrium trend of this market.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_forward6.Which of the following are short-run and which are long-run adjustments? LO3 a.Wendy’s builds a new restaurant. b.Harley-Davidson Corporation hires 200 more production workers. c.A farmer increases the amount of fertilizer used on his corn crop. d.An Alcoa aluminum plant adds a third shift of workers.arrow_forward
- (Last Word) Starbucks should continue to add stores in a city Multiple Choice a. as long as the marginal benefit of opening a new location does not fall below the marginal cost. b. as long as the marginal cost of opening a new location does not fall below the marginal benefit. c. until all remaining competing coffee stores have left the market. d. as long as the gap between marginal benefits and marginal costs is growing.arrow_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_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
- 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_forwardSuppose that bicycles are produced by a perfectly competitive, constant-cost industryWhich of the following will have a larger effect the long-run price of bicycles: a government program to advertise the health benefits of bicyclingor (2) a government program increases the demand for steel, an input in the manufacture of bicycles that is produced in an increasing cost industry ? O. Option 1: shifts the demand curve out and increases the price. O. Option 2: shifts the supply curve up and increases the price O. Option 2: it shifts the demand curve up and increases the quantity. O. Option 2: shifts the supply curve up and increases the quantity.arrow_forwardMicrosoft is the only business that sells Computer Operation System in the world. Assuming that Microsoft is maximizing its profit, which of the following statements is true? Select one : O a. Microsoft prices will be less than marginal cost. O b. Microsott prices will equal marginal cost. O c. Microsoft prices wil be a function of supply and demand and will therefore oscillate around marginal costs. O d. Microsoft prices will be higher than marginal cost.arrow_forward
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