EBK ECONOMICS TODAY
18th Edition
ISBN: 9780133920116
Author: Miller
Publisher: YUZU
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Textbook Question
Chapter 23, Problem 5P
Consider the information provided in Problem 23-4 Suppose the market price drops to only 55 per pizza. In the short run, should this pizza shop continue to make pizzas, or will it maximize its economic profits (that is, minimize its economic loss) by shutting down?
23-4. The table nearby represents the hourly output and cost structure for a local pizza shop. The market is
Total Hourty Output and Sales Pizzas | Total Hourty Variable Cost ($) |
0 | 5 |
1 | 9 |
2 | 11 |
3 | 12 |
4 | 14 |
5 | 18 |
6 | 24 |
7 | 32 |
8 | 42 |
9 | 54 |
10 | 68 |
- Calculate the total revenue and total economic profit for this pizza shop at each rate of output
- Assuming that the pizza shop always produces and sells at least one pizza per hour, does this appear to be a situation of short-run or long-run equilibrium?
- Calculate the pizza shop's marginal cost and marginal revenue at each rate of output Based on marginal analysis, what is the profit- maximizing rate of output for the pizza shop?
- Draw a diagram depicting the short-run marginal revenue and marginal cost
curves for this pizza shop, and illustrate the determination of its profit-maximizing output rate.
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Suppose the market for peaches is perfectly competitive. The short-run average
total cost and marginal cost of growing peaches for an individual grower are
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Assume that the market price for peaches is $28.00 per box. What is
the profit-maximizing quantity for peach growers to produce? boxes. (Enter
your response as an integer.)
Price (dollars per box)
40-
36-
32-
28-
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Q
The market for smoothies is perfectly competitive and the market demand schedule
is in the first two columns in the below table. Each of the 100 producers of
smoothies has the costs given in columns 3- 6 when it uses its least-cost plant. What
is the market price of a smoothie?
$5.25
$4.25
$2.91
$2.20
Market demand schedule
Quantity
demanded
(smoothies
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1,000
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1.90
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2.20
2.91
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950
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700
550
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4
5
6
7
8
9
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Marginal cost
(dollars per
additional
smoothie)
2.50
2.20
1.90
2.00
2.91
4.25
8.00
Average
variable cost
(dollars per smoothie)
4.00
3.53
3.24
3.00
2.91
3.00
Average total
cost
3.33
7.33
6.03
5.24
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4.34
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A gizmo producer operates in a perfectly competitive market with a price of $100 for a can of gizmos.
The gizmo producer has a marginal cost curve equal to 0.52q, where q is the number of cans of
gizmos produced. The gizmo producer currently produces 192 cans of gizmos. Should the gizmo
producer produce 193 cans of gizmos instead?
No, the marginal cost of the 192nd box is above marginal revenue, so production is
already too high.
No, while the marginal cost of the 192nd box is below marginal revenue, the marginal
cost of 3rd box is above it, so profit is already maximized.
None of these answers.
Yes, the marginal cost of the 192nd box is below marginal revenue, so production is
too low, and profits are not maximized.
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