Consider the diagram below which is applicable to a perfectly competitive firm, which at present faces a market clearing price of $20 per unit and produces 10,000 units of output per week. What is the firm’s current average revenue per unit? What are the present profits of this firm? Is the firm maximizing economic profits? Explain. If the market clearing price drops to $12.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimize its economic losses)? Explain. If the market clearing price drops to $7.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimizes its economic losses)? Explain.

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Answer 1

Question

Chapter 23, Problem 3P

To determine

Consider the diagram below which is applicable to a perfectly competitive firm, which at present faces a market clearing price of $20 per unit and produces 10,000 units of output per week.

What is the firm’s current average revenue per unit?

What are the present profits of this firm? Is the firm maximizing economic profits? Explain.

If the market clearing price drops to $12.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimize its economic losses)? Explain.

If the market clearing price drops to $7.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimizes its economic losses)? Explain.

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Answer 2

Question

Chapter 23, Problem 3P

To determine

Consider the diagram below which is applicable to a perfectly competitive firm, which at present faces a market clearing price of $20 per unit and produces 10,000 units of output per week.

What is the firm’s current average revenue per unit?

What are the present profits of this firm? Is the firm maximizing economic profits? Explain.

If the market clearing price drops to $12.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimize its economic losses)? Explain.

If the market clearing price drops to $7.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimizes its economic losses)? Explain.

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Answer 3

Question

Chapter 23, Problem 3P

To determine

Consider the diagram below which is applicable to a perfectly competitive firm, which at present faces a market clearing price of $20 per unit and produces 10,000 units of output per week.

What is the firm’s current average revenue per unit?

What are the present profits of this firm? Is the firm maximizing economic profits? Explain.

If the market clearing price drops to $12.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimize its economic losses)? Explain.

If the market clearing price drops to $7.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimizes its economic losses)? Explain.

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Answer 4

Question

Chapter 23, Problem 3P

To determine

Consider the diagram below which is applicable to a perfectly competitive firm, which at present faces a market clearing price of $20 per unit and produces 10,000 units of output per week.

What is the firm’s current average revenue per unit?

What are the present profits of this firm? Is the firm maximizing economic profits? Explain.

If the market clearing price drops to $12.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimize its economic losses)? Explain.

If the market clearing price drops to $7.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimizes its economic losses)? Explain.

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Answer 5

Chapter 23, Problem 3P

To determine

Consider the diagram below which is applicable to a perfectly competitive firm, which at present faces a market clearing price of $20 per unit and produces 10,000 units of output per week.

What is the firm’s current average revenue per unit?

What are the present profits of this firm? Is the firm maximizing economic profits? Explain.

If the market clearing price drops to $12.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimize its economic losses)? Explain.

If the market clearing price drops to $7.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimizes its economic losses)? Explain.

Answer 6

Chapter 23, Problem 3P

To determine

Consider the diagram below which is applicable to a perfectly competitive firm, which at present faces a market clearing price of $20 per unit and produces 10,000 units of output per week.

What is the firm’s current average revenue per unit?

What are the present profits of this firm? Is the firm maximizing economic profits? Explain.

If the market clearing price drops to $12.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimize its economic losses)? Explain.

If the market clearing price drops to $7.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimizes its economic losses)? Explain.

Answer 7

Chapter 23, Problem 3P

To determine

Consider the diagram below which is applicable to a perfectly competitive firm, which at present faces a market clearing price of $20 per unit and produces 10,000 units of output per week.

What is the firm’s current average revenue per unit?

What are the present profits of this firm? Is the firm maximizing economic profits? Explain.

If the market clearing price drops to $12.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimize its economic losses)? Explain.

If the market clearing price drops to $7.50 per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimizes its economic losses)? Explain.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 23 - Prob. 23.1LO Ch. 23 - Prob. 23.2LO Ch. 23 - Prob. 23.3LO Ch. 23 - Prob. 23.4LO Ch. 23 - Prob. 23.5LO Ch. 23 - Prob. aFCT Ch. 23 - Prob. bFCT Ch. 23 - Prob. cFCT Ch. 23 - Prob. 1CTQ Ch. 23 - Prob. 2CTQ

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