Microeconomics For Today (MindTap Course List)
9th Edition
ISBN: 9781305507111
Author: Irvin B. Tucker
Publisher: Cengage Learning
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Question
Chapter 8, Problem 4SQP
To determine
The total revenue and marginal revenue.
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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?
The following graph plots the marginal cost (MC) curve, average total cost (ATC) curve, and average variable cost (AVC) curve for a firm operating in
the competitive market for sun lamps.
COSTS (Della)
72
04
8
56
24
16
.
0
Price
(Dollars per lamp)
MOD
8
12
36
48
60
10
ATC
AVC
40
00
QUANTITY (Thousands of lamps)
For every price level given in the following table, use the graph to determine the profit-maximizing quantity of lamps for the firm. Further, select
whether the firm will choose to produce, shut down, or be indifferent between the two in the short run. (Assume that when price exactly equals
average variable cost, the firm is indifferent between producing zero lamps and the profit-maximizing quantity of lamps.) Lastly, determine whether
the firm will earn a profit, incur a loss, or break even at each price.
Quantity
(Lamps)
?
Produce or Shut Down?
Profit or Loss?
Suppose Hubert runs a small business that manufactures shirts. Assume that the market for shirts is a price-taker market, and the market price is $10
per shirt.
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 the first seven shirts that Hubert
produces, including zero shirts.
TOTAL COST AND REVENUE (Dollars)
125
100
75
50
25
-25
-50
0
0
1
2
☐
■
U
3 4
5
QUANTITY (Shirts)
L
6
Total Cost
7
8
Total Revenue
Profit
?
Calculate Hubert's marginal revenue and marginal cost for the first seven shirts he produces, 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.
Chapter 8 Solutions
Microeconomics For Today (MindTap Course List)
Ch. 8.5 - Prob. 1YTECh. 8.5 - Prob. 2YTECh. 8 - Prob. 1SQPCh. 8 - Prob. 2SQPCh. 8 - Prob. 3SQPCh. 8 - Prob. 4SQPCh. 8 - Prob. 5SQPCh. 8 - Prob. 6SQPCh. 8 - Prob. 7SQPCh. 8 - Prob. 8SQP
Ch. 8 - Prob. 9SQPCh. 8 - Prob. 10SQPCh. 8 - Prob. 11SQPCh. 8 - Prob. 12SQPCh. 8 - Prob. 1SQCh. 8 - Prob. 2SQCh. 8 - Prob. 3SQCh. 8 - Prob. 4SQCh. 8 - Prob. 5SQCh. 8 - Prob. 6SQCh. 8 - Prob. 7SQCh. 8 - Prob. 8SQCh. 8 - Prob. 9SQCh. 8 - Prob. 10SQCh. 8 - Prob. 11SQCh. 8 - Prob. 12SQCh. 8 - Prob. 13SQCh. 8 - Prob. 14SQCh. 8 - Prob. 15SQCh. 8 - Prob. 16SQCh. 8 - Prob. 17SQCh. 8 - Prob. 18SQCh. 8 - Prob. 19SQCh. 8 - Prob. 20SQ
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