MYECONLAB+ETEXT+KNAPP 104 STUDENT PACKET
MYECONLAB+ETEXT+KNAPP 104 STUDENT PACKET
6th Edition
ISBN: 9781323477816
Author: HUBBARD/KNAPP
Publisher: PEARSON C
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Chapter 12, Problem 12.3.4PA
To determine

The quantity, price and profit of the basketball producer.

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Briefly explain using a graph whether given statement is true or false. ‘To maximise profit, a firm should produce the quantity where the difference between marginal revenue and marginal cost is the greatest. If a firm produces more than this quantity, then the profit made on each additional unit will be falling.’
Suppose Kevin runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $20 per teddy bear.   The following graph shows Kevin's total cost curve.   Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero through seven (inclusive) that Kevin produces.   Calculate Kevin's marginal revenue and marginal cost for the first seven teddy bears he produces, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity.   Kevin's profit is maximized when he produces ___ teddy bears. When he does this, the marginal cost of the last teddy bear he produces is ___ , which is (greater/less) than the price Kevin receives for each teddy bear he sells. The marginal cost of producing an additional teddy bear (that is,…
Briefly explain in (2-3 sentences) why a firm may choose to stay open in the short run even if their economic profit is below zero.
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