EBK ESSENTIALS OF ECONOMICS
7th Edition
ISBN: 8220102452107
Author: Mankiw
Publisher: CENGAGE L
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Chapter 13, Problem 5QCMC
To determine
The relationship between price, marginal cost, and
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Students have asked these similar questions
George Stigler, "Perfect Competition, Historically Contemplated," Journal of Political Economy,Vol. 55, No. 1, (February 1957), pp. 1-17.
Despite the fact that few firms sell identical products in markets where there are no barriers to entry, economists believe that the model of perfect competition is important because
A.
economists prefer studying theoretical markets instead of actual markets.
B.
all markets eventually become perfectly competitive.
C.
it is a
benchmark—a
market with the maximum possible
competition—that
economists use to evaluate actual markets that are not perfectly competitive.
D.
this is the type of market that our business laws protect and promote.
) In the long run equilibrium of a competitive market with identical firms, what is the relationship between price ( P ), marginal cost ( MC ), and average total cost ( ATC )? if
P > MC and P > ATC.
P > MC and P = ATC.
Assume that a firm in a competitive market faces the following cost information. If the market price for this firm's product is $40, calculate the profit maximizing level of output for this firm using marginal analysis. It may help to create your own cost table and fill in columns for Marginal Cost and Average Total Cost based on the Total Cost information below.
a.What is the level of profit for this firm at the profit maximizing output?
b.To convince yourself that the quantity you found is indeed the profit maximizing quantity, try calculating what the profit would be at the next higher level of output. What did you find?
c. What do you predict will happen in this market over the long run?
Chapter 13 Solutions
EBK ESSENTIALS OF ECONOMICS
Ch. 13.1 - Prob. 1QQCh. 13.2 - How does a competitive firm determine its...Ch. 13.3 - Prob. 3QQCh. 13 - Prob. 1QRCh. 13 - Prob. 2QRCh. 13 - Prob. 3QRCh. 13 - Prob. 4QRCh. 13 - Prob. 5QRCh. 13 - Prob. 6QRCh. 13 - Prob. 7QR
Ch. 13 - Prob. 8QRCh. 13 - Prob. 1QCMCCh. 13 - Prob. 2QCMCCh. 13 - Prob. 3QCMCCh. 13 - Prob. 4QCMCCh. 13 - Prob. 5QCMCCh. 13 - Prob. 6QCMCCh. 13 - Prob. 1PACh. 13 - Prob. 2PACh. 13 - Prob. 3PACh. 13 - Prob. 4PACh. 13 - Prob. 5PACh. 13 - Prob. 6PACh. 13 - A firm in a competitive market receives 500 in...Ch. 13 - Prob. 8PACh. 13 - Prob. 9PACh. 13 - Prob. 10PACh. 13 - Prob. 11PACh. 13 - Prob. 12PA
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- In the long-run equilibrium of a competitive market with identical firms, what are the relationships among price (P), marginal cost (MC), and average total cost (ATC)?arrow_forwardSuppose a perfect competitive firm’s total cost curve and marginal cost curve are TC= Q2+ 4Q+100 Also suppose that the market equilibrium price is given as $20. A. Find equations for the firm’s fixed cost (FC), variable cost (VC), average total cost (ATC), average variable cost (AVC) and Marginal cost (MC). B. Find the output level that minimizes average total cost (ATC). C. Calculate the price below which a firm in the market will not produce any output (the shutdown price).arrow_forwardThe graph below shows cost curves for a typical firm operating in a perfectly competitive market. Curve 1 represents Marginal Cost (MC), Curve 2 represents Average Variable Costs (AVC) and Curve 3 represents Average Total Costs (ATC). Suppose that the equilibrium price is $12. What will happen in this market in the long run? a. No new entry/no exit. b.Existing firms will exit. c.New firms will enter.arrow_forward
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- Economics In a short-run perfectly competitive market of tomatoes, when P=$9, firm X produces 0 and firm Y produces 10 tons; when P=$10, firm X produces 5 tons and firm Y produces 15 tons. The following relationship must be true: $10 > (lowest point of AC in X) > (lowest point in AVC in X) > (lowest point in AC in Y) > $9 > (lowest point of AVC in Y) True or Falsearrow_forwardSee attached image for question to be answered.arrow_forwardIn a short-run perfectly competitive market of tomatoes, when P=$9, firm X produces 0 and firm Y produces 10 tons; when P=$10, firm X produces 5 tons and firm Y produces 15 tons. The following relationship must be correct or incorrect? $10 > (lowest point of AC in X) > (lowest point in AVC in X) > (lowest point in AC in Y) > $9 > (lowest point of AVC in Y)arrow_forward
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