Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
20th Edition
ISBN: 9780078021756
Author: McConnell, Campbell R.; Brue, Stanley L.; Flynn Dr., Sean Masaki
Publisher: McGraw-Hill Education
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Chapter 12.4, Problem 2QQ
To determine
Accounting profit.
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Perfect Competition
MC - Marginal Cost
MR - Marginal Revenue
ATC - Average Total Cost
Refer to the figure above. If this firm is producing the profit-maximizing quantity and selling it at the profit-maximizing price, the firm's total revenue will be:
$240
$90
$60
$180
Justin’s Jeans sells in a perfectly competitive market with a downward-sloping demand curve and an upward-sloping supply curve. The market price is $33 per unit, and the total fixed cost is $30.(a) Identify the profit-maximizing quantity. Explain using marginal analysis. (b) Calculate the economic profit at the profit-maximizing quantity you identified in part (a). Show your work.(c) Calculate the average fixed cost of producing 6 units. Show your work.(d) Based on your answer to part (b), will the number of firms in the industry increase, decrease, or stay the same in the long run? Explain.(e) Based on your answer to part (b), will the market price increase, decrease, or stay the same in the long run? Explain.(f) The income elasticity of demand for Good M is 1.4, and the cross-price elasticity of demand for jeans with respect to the price of Good M is −0.75. Based on your answer to part (e), what will happen to the demand for jeans? Explain.(g) Now assume that the market in which…
1c. Using Excel or grid paper, based on the above information, plot the demand curve, MR curve, MC curve and ATC curve. Label the profit-maximizing quantity and price, total cost, total revenue and profit.
Chapter 12 Solutions
Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
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- 3. Johnny Rockabilly has just finished recording his latest CD. His record company's marketing department determines that the demand for the CD is as follows: Price Number of CDs $24 10 000 22 20 000 20 20 30 000 18 40 000 16 50 000 14 60 000 The company can produce the CD with no fixed cost and a variable cost of $5 per CD. a. Find total revenue for quantity equal to 10 000, 20 000, and so on. What is the marginal revenue for each 10 000 increase in the quantity sold? b. What quantity of CDs would maximize profit? What would be the price? What would be the profit? c. If you were Johnny's agent, what recording fee would you advise Johnny to demand from the record company? Why?arrow_forwardPerfect Competition MC - Marginal Cost MR - Marginal Revenue ATC - Average Total Cost Refer to the figure above. If this firm is producing the profit-maximizing quantity and selling it at the profit-maximizing price, the firm's profit will be: $240 $160 $80 $60arrow_forwardBecause of increasing marginal cost, most supply curvesA) are horizontal. B) have a negative slope. C) are vertical. D) have a positive slope.arrow_forward
- A firm that has as its objective the maximization of revenues rather than profits would produce an output level for which: Select one: a. marginal revenue is equal to zero b. total revenue is equal to total cost c. marginal revenue is equal to average cost d. marginal revenue is equal to price In the short run, a firm should continue to operate, even if it is incurring losses, provided: Select one: a. the firm can cover its variable costs b. the firm can cover its fixed costs c. none of the above d. the firm can cover the sum of its variable and fixed costsarrow_forward1.) Price: 2.) Quantity: 3.) Total Revenue: 4.) Total Cost: 5.) Total Variable Cost: 6.) Total Fixed Cost: 7.) Profit: 8.) Produce or Shut down: 9.) Draw, shade, and label profit rectangle 10.) Price: 11.) Quantity: 12.) Total Revenue: 13.) Total Cost: 14.) Total Variable Cost: 15.) Total Fixed Cost: 16.) Profit: 17.) Produce or Shut down: 18.) Draw, shade, and label profit rectanglearrow_forwardUse the table given to answer the questions. Demand for Air Fryers at Ally's shop Price (P) Quantity (Q) 140 110 80 50 I 2 3 4 Total Revenue 140 220 240 200 Marginal Revenue 140 80 20 -40 What is the Output Effect of decreasing the price of air fryers from $110 to $80? $ 20 Incorrect What is the Discount Effect of decreasing the price of air fryers from $110 to $80? $ 60 < Feedback Your answer to the first blank is incorrect. To find the output effect, you have to calculate the increase in revenue coming from the sale of that additional unit. Macmillan Learningarrow_forward
- Draw the cost curves for a typical firm. For a given price, explain how the firm chooses the level of output that maximizes profit. At that level of output, show on your graph the total revenue of the firm. Show its total costs.arrow_forwardThe average revenue curve is equal to a. The product's price b. The total revenue curve c. The product's demand function c. The marginal revenue curvearrow_forwardhelp me pleasearrow_forward
- You're a milk company in a highly competitive market. The market price of hay and alfalfa, your cows' favorite food, has recently dropped. Which of the following is likely true? A.The price elasticity of demand for your milk decreases B. You can charge a higher price for milk C. Your company's demand curve has fallen D. Your shut down point becomes largerarrow_forwardPart A. When the demand curve is given by P1 = $30, and the firm behaves optimally in the short run, what is the total revenue? A. $ 900 B. $1350 C. $800 D. $2400 Part B. When the demand curve is given by P1 = $30, how much profit is this producer earning? A. $ 500 B. $ 800 C. $ 1200 D. $ 1600 Part C. Does the graph above represent the firm’s short run equilibrium or long run equilibrium, for a given price? A. short run B. long run C. short run or long run D. neither short run nor long runarrow_forwardUsing the graph for the questions : A. There are fixed costs of $50 no matter what the output level is. Fill in the fixed cost column B. Fill in the total costs column C. Fill in the marginal costs column D. This is a perfectly compatible firm . The market price for the output they produce is $40/ unit of output. Fill in the marginal revenue column E. Fill in the total revenue column F. Fill in the profit column G. What is the profit maximizing level of outputarrow_forward
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