Principles of Microeconomics California Edition 2nd Edition
2nd Edition
ISBN: 9780393622089
Author: Dirk Mateer, Lee Coppock
Publisher: W. W. Norton
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Question
Chapter 9, Problem 3SP
To determine
Calculate the total revenue for the business at each level of output.
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Check out a sample textbook solutionStudents have asked these similar questions
Consider the following data: equilibrium price = $7.50, quantity of output produced
100 units, average total cost = $9, and average variable cost = $8. What will the
firm do and why?
=
a. Shut down in the short run, because price is below average variable cost.
b. Shut down in the short run, because price is below average total cost.
c. Continue to produce in the short run, because price is greater than average
variable cost.
d. Continue to produce in the short run, because firms are always stuck with
having to produce in the short run.
Juan makes dining room chairs in a perfectly competitive industry. He is looking for economic advice and tells you the following data about his business. (Assume cost curves have their standard shapes.)
Total revenue is $120,000,
Total fixed costs are $100,000
Total variable costs are $110,000
Marginal cost is $200/unit
Quantity produced is 600 units
What will you suggest to Juan?
A: Shut down immediately
B: Do not shut down and increase production
C: Do not shut down but decrease production
D: Do not shut down and do not change the current production level.
Draw the cost curves for a typical firm. For a given price, explain how the firm chooses the level of output that maximizes profit. At that level of output, show on your graph the total revenue of the firm. Show its total costs.
Chapter 9 Solutions
Principles of Microeconomics California Edition 2nd Edition
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Would a firm earning zero economic profit continue to produce, even in the long run? In long-run competitive equilibrium, a firm earning zero economic profit A. will not continue to produce because this return is not covering its opportunity costs. B. will not continue to produce because it would be better off shutting down. C. will not continue to produce because such profit corresponds with negative accounting profit. D. will continue to produce because such profit is as high a return as could be earned elsewhere. E. will not continue to produce because it could earn a better return in another industry.arrow_forwardA profit-maximizing firm incurs an economic loss of $30,000 per year. Its fixed cost is $25,000 a year. Should the firm produce or shut down in the short run?b. Suppose instead that the firm has a fixed cost of $35,000 per year. Should the firm produce or shut down in the short run?arrow_forwardFor the following, decide whether you agree or dis-agree and explain your answer: a. A firm earning positive profits in the short run always has an incentive to increase its scale of operation in the long run. b. A firm suffering losses in the short run will continue to operate as long as total revenue at least covers fixed cost.arrow_forward
- A profit-maximizing firm in a competitive market is currently producing 500 units of output. It has average revenue of $10, average total cost of $8, and fixed costs of $200. a. What is its profit? b. What is its marginal cost? c. What is its average variable cost? d. Is the efficient scale of the firm more than, less than, or exactly 100 units?arrow_forwardThe graph below gives marginal costs (MC), average variable costs (AVC), and average total costs (ATC) for a firm. Note that marginal revenue (MR) is not shown. Suppose the firm operates in a perfectly competitive market and acts to maximize its profit. which of the following is/are true? I. At a price of 1.5, the firm will shut down in the short-run. II. At a price of 0.5, the firm will shut down in the short-run. III. At a price of 2.5, the firm will make a positive economic profit. 7 MC АТС AVC 3 2 1 1 Quantity 2. 4. Pricearrow_forwardThe figure depicts the demand curve of a firm producing cars, together with its marginal cost, average cost, and isoprofit curves. Based on this figure, which of the following statements are correct? 8,000 Price, Marginal cost ($) 0 E Quantity of cars, Q At A, the firm makes positive profits. The firm makes the same profit at B and D. O Profit margin is the same at B and D. O The slope of the isoprofit is zero at D. MC Isoprofit A Isoprofit B AC 100arrow_forward
- QUESTION 10 Tony sells pet collars at the Sunday markets. Assume the market for pet collars is perfectly competitive. Tony's profit maximising output is 34 collars. At this profit-maximising output level, Tony's average total cost is $4.20 per collar. His minimum average variable cost is $3.10 per collar. The market price is $5.40 per collar. Answer the following questions: (use a negative value if a loss). Answer in dollars, rounded to two a. Tony's economic profit or loss is decimal places (ie: to the nearest cent). b. State whether the following statement is true or false: "Tony's marginal cost is $4.20 per collar." Type T for true, or F for false c. At the current market price, should Tony shut down? Type Y for Yes, or N for Noarrow_forwardPlease answer the following question:arrow_forwarda) A profit-maximizing business incurs an economic loss of $10,000 per year. Its fixed cost is $15,000 per year. Should it produce or shut down in the short run? Should it stay in the industry or exit in the long run? b) Suppose instead that this business has a fixed cost of $6,000 per year. Should it produce or shut down in the short run? Should it stay in the industry or exit in the long run?arrow_forward
- 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. a.Approximately where do you think the price will end up in this market over the long run? b.Last, instead of assuming a given price, how would you go about finding the equilibrium price if you were given information on market demand?arrow_forwardFigure 1 shows the short-run cost curves of a toy producer. The market has 1,000 identical producers and Table 1 shows the market demand schedule for toys. At what market prices would the firm shut down temporarily? What is the market price of a toy in long-run equilibrium? How many firms will be in the toy market in the long run? Explain your answer.arrow_forwardA firm sells 1,000 units per week. Suppose the average variable cost is $15, and the average cost is $55. In the short run, the break-even price is:___?_____. . In the long run, the break-even price is . Suppose the firm charges a price of $5 per unit. Use the following table to indicate whether the firm will shut down or continue to produce in the short run and the long run. Time Continue to Produce Shut Down Short Run ? ? Long Run ? ?arrow_forward
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