Principles of Microeconomics (Second Edition)
2nd Edition
ISBN: 9780393623840
Author: Lee Coppock, Dirk Mateer
Publisher: W. W. Norton & Company
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Chapter 9, Problem 3SP
To determine
Calculate the total revenue for the business at each level of output.
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Students have asked these similar questions
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.
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.
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 (Second Edition)
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- If a firm's total revenue is $100, it's total cost is $130, and its total fixed cost is $40. Should the firm stay in business? Explain. How does a firm in perfect competition determine its outputs to produce? Why will the firm not produce this level of output? Explain.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_forwardA 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_forward
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- a) 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_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_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_forward
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