Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 12, Problem 12P
To determine
(a)
The output that a firm produce with given respective prices.
To determine
(b)
Determine the economic profit, Zero economic profit and negative economic profit of the firm.
To determine
(c)
Calculation of price at which firm will shut down.
To determine
(d)
The firm's supply curve.
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Question 9
Which of the following is(are) correct?
A competitive firm will exit the market in the long-run if economic profit is zero.
A competitive firm will shut down in the short-run if the price is below average total cost.
A: 1 only
B: 2 only
C: Both 1 and 2
D: Neither 1 nor 2
Refer to the graph of a perfectly competitive market. How many units will the firm choose to sell, and at what price? In the short term, what will be the total revenue, total cost, and total profit of the firm? If at some point in the future the market price fell below $6 (for example where Point A is) what would the firm do?
How does a competitive firm determines its profit-maximising level of output? Explain. When does a profit-maximising competitive firm decide to shut down? When does it decide to exit a market? Draw diagram.
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Similar questions
- Figure 1 shows the short-run cost curves of a toy producer. The market has 1,000 identical producers and Table 1 shows the market demand schedule for toys. At what market prices would the firm shut down temporarily? What is the market price of a toy in long-run equilibrium? How many firms will be in the toy market in the long run? Explain your answer.arrow_forwardC. Table below shows some cost data for a perfectly competitive firm i. Is the firm operating in the short run or long run? How do you know?ii. At a market price of $32, what would be the output of the firm? Does this firm makeeconomic profit or loss at this price level? iii. If the market price is $32, would the firm shut down or keep operating? Why? iv. Based on your answer above, would firms enter or exit the market in the long run? What will happen to the market price?arrow_forward(10) In long-run equilibrium in a perfectly competitive market, which of the following is true? (a) Average cost equals marginal cost (b)Profit = 0 (C)Price equals marginal cost (d)all of the abovearrow_forward
- 60. In a perfectly competitive market, which of the following will increase the economic profit the firms make in the short run? A. an increase in labor costs B. a decrease in market demand C. an increase in market demand D. an increase in the number of firmsarrow_forwardSuppose the price determined by the market is 1.5. Assume a perfectly competitive industry. Show all solutions. Do not round off in the solution. Box/Encircle final answers and round them off to the nearest two decimal places. What is the profit-maximizing/loss minimizing level of output? What is the profit/loss at the profit-maximizing/loss minimizing level of output? What is a short-run condition for this perfectly competitive firm? What should the firm do in the short run? What should the firm do in the long run?arrow_forwardA 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 cost of $200. What is its profit? What is its marginal cost? What is its average variable cost?arrow_forward
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