EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 11.6, Problem 2QQ
To determine
Profit maximizing output.
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Question 1 A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, average total cost of $8, and fixed costs of $200. a. What is its profit? b. What is its marginal cost? c. What is its average variable cost? d. Is the efficient scale of the firm more than, less than, or exactly 100 units?
Doug's Donut Shop operates in a competitive market and is currently producing 200 donuts. He has average revenue of $1.50, his average total cost is $1, and his total fixed costs are $30. Does Doug have profits or losses?Select one:a. losses of $300.b. losses of $100.c. profits of $200.d. profits of $100.
A profit-maximizing firm in a competitive market is currently producing 500 units of output. It has
average revenue of $10, average total cost of $8, and fixed costs of $200. a. What is its profit? b.
What is its marginal cost? c. What is its average variable cost? d. Is the efficient scale of the firm more
than, less than, or exactly 100 units?
Chapter 11 Solutions
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- i. Calculate the marginal cost, marginal revenue and profit for each unit of production. ii. How many units should the firm produce to maximise profit?arrow_forwardWhat would happen in the long if the firm produces 84 units and charges $28? PRICE D ## 10 0 1 10 QUANTITY() ATC a. Firm will exit from the industry. b. Firm will stay in the industry. c. Firm will either stay in the industry or exit from the industry. d. Firm will stay in the industry whether it earns profits or losses.arrow_forwardIf profits depend on both how much is produced (output) and on the level of advertising, then a profit-maximizing firm should choose the levels of output and advertising at which: a. the marginal revenue of output equals the marginal cost of output. b. the addition to total revenue of the last unit of advertising equals the addition to total cost of the last unit of advertising. c. total revenue equals total cost for both output and advertising d.both a and b e. both b and carrow_forward
- 1. Fill in this chart and explain why the firm earnsa profit no matter how many units they produce or the price they choose. 2. Using this data, how many units should this firm produce and what price should they chargeassuming they want to profit maximize.arrow_forwardProfits are maximized at the output at which marginal cost equals marginal revenue. If the market price falls below the minimum average variable cost: a. the firm should produce less. b. the firm should produce more. c. the firm should shut down. d. none of the abovearrow_forwardExercise 5.6 Sparkle is one firm of many in the market for toothpaste, which is in long-run equilibrium. a. Draw a diagram showing Sparkle’s demand curve, marginal revenue curve, average total cost curve and marginal cost curve. Label Sparkle’s profit-maximizing output and price. b. What is Sparkle’s profit? Explain. c. On your diagram, show the consumer surplus derived from the purchase of Sparkle toothpaste. Also show the deadweight loss relative to the efficient level of output. d. If the government forced Sparkle to produce the efficient level of output, what would happen to the firm? What would happen to Sparkle’s customers?arrow_forward
- How many of the following statements are true? (i) Maximising profit involves maximising Revenue (ii) Maximising profit involves maximising output (iii) Maximising profit involves minimising variable costs (iv) Maximising profit involves producing at the quantity where marginal profit is zero. a.Three b.One c.None d.Two e.Fourarrow_forwardWhat determining factor do buyers use to select products in a pure competition market? A. Brand B. Quality C. Price D. Profitarrow_forwardI. A company produces at an output level where marginal cost is equal to marginal revenue and has the following revenue and cost levels: Total revenue = $1,450 Total cost = $1,500 Total variable cost = $1,300 What would you suggest? a. Shut down. b. Continue to produce because the loss is less than the total fixed cost. c. Increase production to lower the marginal cost. e. Raise the price. II. At current long-run production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. If the market is perfectly competitive, the firm should a. cut back on production. b. stop production all together. c. produce more. d. continue producing at current levels.arrow_forward
- 26. Which of the following statements about profit maximization is true? a. It is something that all firms actually do. b. It is something which economists believe that all firms actually do. C It is what economists believe is the most common aim of firms. d. It means that no firms ever make losses.arrow_forwardMarginal profit is negative when A. output exceeds the profit-maximizing level. B. total cost exceeds total revenue. C. marginal revenue is negative. D. profit is negative.arrow_forwardCost MC Select one: ATC AVC ABC D Quantity C in the figure above represents the output level where the firm Quantity a. maximizes profits in the short-run. b. minimizes total costs in the short-run. C. maximizes profits in the long-run. d. minimizes marginal costs in the long-run. e. None of the above.arrow_forward
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