PRIN OF MICROECONOMICS
2nd Edition
ISBN: 9780393914085
Author: coppock
Publisher: Norton, W. W. & Company, Inc.
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Question
Chapter 9, Problem 5SP
(a)
To determine
Determine at what price is the firm making an economic profit, breaking even and experiencing an economic loss.
(b)
To determine
Identify the shutdown point of the firm.
(c)
To determine
Identify the price at which the firm’s short-run supply curve and long-run supply curve exist.
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Students have asked these similar questions
Label the curves in the following graph
A. At each market price p1, p2, p3 at what output level would the firm produce?
B. What profit would be earned if the market price was p1?
C. What are the shutdown and break prices?
C. Table below shows some cost data for a perfectly competitive firm
i. Is the firm operating in the short run or long run? How do you know?ii. At a market price of $32, what would be the output of the firm? Does this firm makeeconomic profit or loss at this price level? iii. If the market price is $32, would the firm shut down or keep operating? Why?
iv. Based on your answer above, would firms enter or exit the market in the long run? What will happen to the market price?
Q2. a. Create numbers for the table below
TC
TFC TVC AVC ATC
MC
1
4
5
6
7
9
10
b. Indicate a market price that the firm will suffer from loss in the she run? What is the quantity
level? What is the TR, TC and profit?
Explanation:
c. Indicate a market price that the firm will enjoy positive economic profits in the short run? What is
the quantity level? What is the TR, TC and profit?
Explanation:
2.
3.
Knowledge Booster
Similar questions
- The following graph summarizes the demand and costs for a firm that operates in a perfectly competitive market. a. What level of output should this firm produce in the short run? b. What price should this firm charge in the short run? c. What is the firm’s total cost at this level of output? d. What is the firm’s total variable cost at this level of output? e. What is the firm’s fixed cost at this level of output? f. What is the firm’s profit if it produces this level of output? g. What is the firm’s profit if it shuts down? h. In the long run, should this firm continue to operate or shut DOWNarrow_forwardPlease solve these 3 questions. 1. If the firm is making a positive profit, do you expect it to persist in the long run? Why?2. What is the lowest possible price the firm would be willing to sell for in the short run?3. What is the lowest possible price the firm would be willing to sell for in the long run?arrow_forwardSlide 2 Questions: a. What is the total revenue of the firm at the optimum level of output? b. What is the total cost at the optimum level of output? c. What is the profit of the firm at the optimum (profit-maximizing) level of output? d. What is the average cost of each unit sold at the optimum level of output? Is the firm at its log-run equilibrium? If yes/no, why?arrow_forward
- A. If a firm operating in a perfectly competitive market doubles the amount it sells, what happens to the price of its output and its total revenue? B. How does a competitive firm determine its profit-maximizing level of output? When does a competitive firm decide to temporarily shut down in the short run? Explain, using the concepts of marginal cost, marginal revenue, price, and average variable cost.arrow_forwardUse a graph to demonstrate the scenario where a competitive firm would be earning positive profit in the short run. Can this scenario be maintained in the long run? Why? What are the ‘shutdown point’ and ‘break even point’ of a competitive firm . Explain with diagram. A competitive market starts in a situation of long run equilibrium. Then there is an increase in demand. Explain what happens in the short run and long run, using necessary diagrams.arrow_forwardGraph the demand curve for a pure competitive firm, label the graph. What is the relationship between marginal revenue (MR) and the demand curve (is MR greater, equal, or less than the demand curve)?arrow_forward
- According to the figure above: a. Is the firm maximizing economic profit? b. What is the firm's short run shutdown price?arrow_forwardAnswer the following question based on the graph below, which is for Blue Smooth Yoga Mats Ltd. one of 50 small firms operating in the industry. a. What is the profit-maximizing output? Output: b. What price will the firm charge? Price: $ c. How much excess capacity exists at the output in (a)? Excess capacity: d. Is Blue Smooth making economic profits? e. Is the current situation long-run equilibrium?arrow_forwardDraw the cost curves for a typical firm. Explain how a competitive firm chooses the level of output that maximizes profit. At that level of output, show on your graph the firm’s total revenue and total cost.arrow_forward
- Firm Profit, Loss, and Shut Down Based upon the graph, answer the following questions: 1) What is the production level that will maximize the profit for the firm? 2) What is the profit-maximizing price the firm will charge? 3) Will the firm incur an economic gain or economic loss? 4) What will the dollar amount of economic gain or economic loss be? 5) What will be the price and quantity where the firm will shut down?arrow_forwardDraw the cost curves for a typical firm. Explain how a competitive firm chooses the level of output that maximizes profit. At that level of output, show on your graph the firm's total revenue and total costs.arrow_forwardUsing the graph answer the following questions: A: At the profit maximizing level of output, what is the firm's total revenue? B: At the profit maximizing quantity, what is the firm's total cost? C: At the profit maximizing quantity, what is the firm's profit? D: Assuming that most firms in the industry have similar costs, describe what happens in this market to bring the industry to a long-run equilibrium (where there are zero profits).arrow_forward
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