LSC CUMBERLAND EC202 MICRO>PKG<
21st Edition
ISBN: 9781260586992
Author: McConnell
Publisher: MCG
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Chapter 11, Problem 3DQ
To determine
Entry and exit of the pure competition.
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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.
The following figure shows the revenue and cost curves for a firm X.
RM
10
a.
b.
C.
7
6
LO
5
4
3.5
0
20 25 30
MC
40
AVC
AC
AR=MR
Units
If a firm X achieves productivity efficiency, what will be the total revenuel
generated
At what price will a firm stop operating? Please explain.
If the market price is RM4.00, what is the total profit or total loss.
Chapter 11 Solutions
LSC CUMBERLAND EC202 MICRO>PKG<
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- 4. Various measures of cost Suppose the imaginary company of Roobek is a small, Jackson-based American apparel manufacturer specializing in athleisure. The following table presents the brand's total cost of production at several different quantities. Fill in the remaining cells of the following table. Quantity Total Cost Marginal Cost (Pairs) (Dollars) (Dollars) 0 1 2 3 4 LO 5 6 120 200 240 285 340 425 540 Fixed Cost Variable Cost (Dollars) (Dollars) Average Variable Cost (Dollars per pair) Average Total Cost (Dollars per pair)arrow_forwardIn the table below, the firm; Output Total Revenue Total Cost $0 $30 $60 $90 $120 $150 $180 $25 $49 $69 $91 $117 $147 $180 O a. cannot be in a perfectly competitive industry, because its short-run economic profits are greater than zero. O b. must be in a perfectly competitive industry, because its marginal cost curve eventually rises. O c. cannot be in a perfectly competitive industry, because its long-run economic profits are greater than zero O d. must be in a perfectly competitive industry, because its marginal revenue is constant. 123 456arrow_forwardConsider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. COSTS (Dollars per pound) 80 72 64 56 co o 32 + 16 8 0 0 4 MC 0 ATC AVC 8 12 16 20 24 28 QUANTITY (Thousands of pounds) 32 38, 72 36 40 Ⓒarrow_forward
- q 0 1 2 3 4 5 6 TFC $5 5 5 5 5 5 5 TVC $0 3 LO 5 9 16 25 36 MC - $3 2 4 7 9 11 P = MR $5 5 5 5 LO 5 5 5 A profit-maximizing firm should produce a quantity of TR $0 5 10 15 20 25 30 TC $5 8 10 14 21 30 41 Profit $-5 - 3 0 1 - 5 11 units. (Enter your response as a whole number.)arrow_forwardWhich of the following statements in the full competitive market is correct? Choose an answer 1. The companies maximize their profit according to the rule «price equals average total costs». O 2. The companies maximize their profit according to the rule "marginal costs equal average total costs". 3. In the short term, the companies always make a profit. O 4. In the short-term market result, it always applies that the market price is above the average total costs. 5. In the long-term market result, the market price corresponds to the average total costs.arrow_forwardRefer to this table to answer the next three questions. The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Quantity 0 1 2 3 4 Profits are maximized when the firm produces O O O 2 0 1 04 O 3 Total Revenue $0 $6 $12 $18 $24 unit(s). Total Cost $6 $8 $12 $17 $24arrow_forward
- 7. Long-run cost relationships The following graph shows the short-run average total cost curves and the long-run average cost curve for a publishing firm. The five marked quantities indicate points of tangency between each short-run average total cost curve (SRATC) and the long-run average cost curve (LRAC); for example, Q₁ marks the point of tangency between SRATC₁ and LRAC. The orange point on SRATC3 indicates the firm's current output level in the short run (Q3). COST PER UNIT SRATC₁ LRAC SRATC2 | " Q₂2₂ SRATC3 O " | 1 1 Q3 QUANTITY OF OUTPUT Q₁ SRATC5 SRATC4 1arrow_forwardIn the figure at right, at which output level is this firm earning negative economic profits? O A. 12 OB. 2 OC. 5 O D. 10 Revenues and Costs ($) 180 160- 140- 120 100+ 80- 60- 40- 20- of 0 2 4 6 8 10 Quantity 12 14 TC TR 16 18 20arrow_forwardThe table below describes a firm that sells output in a perfectly competitive market. Note the second column describes total costs. O $8 O $12 O $6 Output O $4 0 1 2 3 4 5 Which of the following market prices would cause the firm's profit-maximizing output level to be equal to 5? 6 Total Cost (in dollars) $3 $9 $14 $18 $23 $30 $40 4arrow_forward
- 7. A car manufacturer builds both left-hand and right-hand drive cars. It estimates that its costs and the demand faced in each of these respective markets can be modelled by the functions below P1 = 520 – 3Q1 P, = 720 – 4Q2 - TC = 100Q1 + 120Q2 + 4Q1Q2 What is the maximum profit the firm could make? O 24300 O 24800 25300 25800 26500 O0000arrow_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_forwardSuppose the market price for a price taking firm is known to be $2, the total revenue accruing to it if it sells 100 is and the total revenue accruing to it if it sells 200 is O $100, $200 O $200. $400 $200, $400 O 52. S2arrow_forward
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