Principles of Microeconomics (12th Edition)
12th Edition
ISBN: 9780134081199
Author: CASE
Publisher: PEARSON
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Chapter 9, Problem 1.2P
To determine
The decision regarding the shutdown of the firm.
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Suppose a competitive firm operation under the following conditions: price of output is $20, the profit maximizing level of output is 32,000 units, and the total cost(full economic cost) of producing these 32,000 units is $600,000. The firm’s only fixed factor of production (capital) is a $1 million building and you would like to include the opportunity cost of this investment at the going interest rate of 5%. Should this firm close down immediately? What will it do in the long run?
Airbus owns 2 plants and has contracted to produce 10 airplanes next year. The cost per airplane at plant 1 is given by 17 + (q1/10) and the cost per airplane at plant 2 is 7 + q2. No matter how Airbus allocates the production of its planes across the 2 plants, it costs at least as much per plane to produce planes at plant 1 as at plant 2. Therefore, Airbus should shut down plant 1.
True, false, or uncertain? Explain and show your work.
A textile firm in a competitive industry employs a particularly efficient manager to run the operations at its production facility. In the textile industry, a plant manager typically makes a salary of $4,500 per month. The textile firm employing the superior manager faces the LAC and LMC curves shown in the figure below. In long-run competitive equilibrium, the price of the product is $9
a- A typical textile firm in this competitive industry has a minimum long-run average cost of $______. The typical textile firm earns economic profit of $______.
Chapter 9 Solutions
Principles of Microeconomics (12th Edition)
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