MyLab Economics with Pearson eText -- Access Card -- for Microeconomics
6th Edition
ISBN: 9780134125886
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 13, Problem 13.4.8PA
Subpart (a):
To determine
Economic profit, allocative and productive efficiency of the firm.
Subpart (b):
To determine
Economic profit, allocative and productive efficiency of the firm.
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Briefly explain how the total revenue for a profit-seeking firm is determined.
Briefly explain the reason for why in a competitive market we expect economic profits to be zero inthe long run. Why do firms operate even though they face 0 economic profit?
11. Profit maximization using total cost and total revenue curves
Suppose Hubert 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 Hubert'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 Hubert produces.
200
175
Total Revenue
150
125
Total Cost
Profit
100
75
50
25
-25
3
QUANTITY (Teddy bears)
1
2
5
7
8
TOTAL COST AND REVENUE (Dollars)
Chapter 13 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Microeconomics
Ch. 13 - Prob. 13.1.1RQCh. 13 - Prob. 13.1.2RQCh. 13 - Prob. 13.1.3RQCh. 13 - Prob. 13.1.4PACh. 13 - Prob. 13.1.5PACh. 13 - Prob. 13.1.6PACh. 13 - Prob. 13.1.7PACh. 13 - Prob. 13.1.8PACh. 13 - Prob. 13.1.9PACh. 13 - Prob. 13.1.10PA
Ch. 13 - Prob. 13.2.1RQCh. 13 - Prob. 13.2.2RQCh. 13 - Prob. 13.2.3RQCh. 13 - Prob. 13.2.4PACh. 13 - Prob. 13.2.5PACh. 13 - Prob. 13.2.6PACh. 13 - Prob. 13.2.7PACh. 13 - Prob. 13.2.8PACh. 13 - Prob. 13.2.9PACh. 13 - Prob. 13.3.1RQCh. 13 - Prob. 13.3.2RQCh. 13 - Prob. 13.3.3RQCh. 13 - Prob. 13.3.4RQCh. 13 - Prob. 13.3.5PACh. 13 - Prob. 13.3.6PACh. 13 - Prob. 13.3.7PACh. 13 - Prob. 13.3.8PACh. 13 - Prob. 13.3.9PACh. 13 - Prob. 13.3.10PACh. 13 - Prob. 13.3.11PACh. 13 - Prob. 13.3.12PACh. 13 - Prob. 13.4.1RQCh. 13 - Prob. 13.4.2RQCh. 13 - Prob. 13.4.3RQCh. 13 - Prob. 13.4.4RQCh. 13 - Prob. 13.4.5PACh. 13 - Prob. 13.4.6PACh. 13 - Prob. 13.4.7PACh. 13 - Prob. 13.4.8PACh. 13 - Prob. 13.4.9PACh. 13 - Prob. 13.5.1RQCh. 13 - Prob. 13.5.2RQCh. 13 - Prob. 13.5.3PACh. 13 - Prob. 13.5.4PACh. 13 - Prob. 13.5.5PACh. 13 - Prob. 13.5.6PACh. 13 - Prob. 13.5.7PACh. 13 - Prob. 13.6.1RQCh. 13 - Prob. 13.6.2RQCh. 13 - Prob. 13.6.3PACh. 13 - Prob. 13.6.4PACh. 13 - Prob. 13.6.5PACh. 13 - Prob. 13.6.6PA
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- 3. Profit maximization using total cost and total revenue curves Suppose Simone 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 Simone's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven teddy bears that Simone produces, including zero teddy bears. 200 175 Total Revenue 150 125 Total Cost Profit 100 75 50 25 -25 1 3 4 7 8 QUANTITY (Teddy bears) TOTAL COST AND REVENUE (Dollars)arrow_forwardBriefly explain the condition when firm decide to leave (exit) the marketarrow_forwardSuppose Lucia runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a price-taker market, and the market price is $20 per teddy bear. The following graph shows Lucia's total cost curve. Use the blue points (circle symbol) to plot total revenue, and the green points (triangle symbol) to plot profit for the first seven teddy bears that Lucia produces, including zero teddy bears. (?) 175 150 Total Cost Total Revenue 125 100 Profit 75 -25 -50 4 7 8 QUANTITY (Teddy bears) TOTAL COST AND REVENUE (Dollars)arrow_forward
- Briefly explain what the market will illustrate when perfectly competitive firms produce at the quantity where P = MC and explain why this happens. Hint: Efficiencyarrow_forwardBriefly 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.arrow_forward3. Profit maximization using total cost and total revenue curves Suppose Madison operates a handicraft pop-up retail shop that sells cardigans. Assume a perfectly competitive market structure for cardigans with a market price equal to $25 per cardigan. The following graph shows Madison's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for cardigans for quantities zero through seven (including zero and seven) that Madison produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 75 -25 0 0 1 0 2 U 3 5 QUANTITY (Cardigans) 4 6 Total Cost 7 8 。 Total Revenue ▷ Profitarrow_forward
- Calculate Iyana's marginal revenue and marginal cost for the first seven rompers they produce, 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. COSTS AND REVENUE (Dollars per romper) 40 35 30 25 20 15 10 0 0 1 2 3 4 5 6 7 8 QUANTITY (Rompers) Marginal Revenue Marginal Cost ? Iyana's profit is maximized when they produce a total of is $ , an amount rompers. At this quantity, the marginal cost of the final romper they produce than the price received for each romper they sell. At this point, the marginal cost of producing one more romper (the first romper beyond the profit maximizing quantity) is $ , an amount than the price received for each romper they sell. Therefore, Iyana's profit-maximizing quantity occurs at the point of intersection between the Because Iyana is a price taker, the previous condition is equivalent to curves.arrow_forward3. Profit maximization using total cost and total revenue curves Suppose Bob runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $25 per teddy bear. The following graph shows Bob'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 Bob produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 75 50 25 0 -25 O ☐ ☐ 0 1 2 3 4 5 QUANTITY (Teddy bears) ☐ 6 Total Cost 7 8 O Total Revenue Profit ?arrow_forwardImagine Lucia runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan.arrow_forward
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