Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
Chapter 9, Problem 7MC
To determine
Profit.
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Students have asked these similar questions
True/false
1- perfectly competitive firms are sometimes called price takers because they have little or no control over product price.
2- a perfectly competitive firm's horizontal demand curve implies that the firm must lower its price to sell more output.
Multiple choice question - Micro
33) In a competitive market that is characterized by free entry and exit, what will be the result?
A. All firms will operate at efficient scale in the short run.
B. The price of the product will differ across firms.
C. All firms will operate at efficient scale in the long run.
D. The number of sellers in the market will steadily decrease over time
32) When profit-maximizing firms in a competitive market are earning profits, what must be happening in the market?
A. The most inefficient firms will be encouraged to leave the market.
B. New firms will enter the market.
C. Market supply must exceed market demand at the market equilibrium price.
D. Market demand must exceed market supply at the market equilibrium price
a. You are the manager of a firm that sells its product in a competitive market at a price of $60. Your firm's cost function is C = 33 + 3Q2. What is the profit-maximizing output for your firm?
b. You are a manager in a perfectly competitive market. The price in your market is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q2. What level of profits will you make in the short run?
Chapter 9 Solutions
Managerial Economics: A Problem Solving Approach
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Similar questions
- Question 14 Ma owns a pizza shop with AVC = $70 and ATC = $98. It is a competitive market and the market price for pizza is $95. Mr. Ma should A: exit the market in both the short-run and long-run. B: continue his business in both the short-run and long-run. C: continue his business in the short-run but exit in the long-run if the situation continues. D: shut down his business in the short-run but continue in the long-run if the situation continues.arrow_forwardHere are three fictional restaurants and their costs and revenues during March of 2020: Restaurant Fixed Costs Variable Costs Pandemic Revenues The Peach Pit 110,000 85,000 80,000 Gus' Galaxy Grill 75,000 75,000 100,000 Paddy's Irish Pub 50,000 70,000 95,000 a) For each restaurant, calculate their profits during this difficult month. b) Which restaurant, if any, earned a profit? c) Which restaurants were able to remain in business in the short run? Which were forced to shut down entirely? Why?arrow_forwardWhy does the price level in a perfectly competitive market move toward the zero-profit point? A Because profitable firms increase short-run productivity B Because short-run losses reverse the effects of long-run gains C Because firms enter and exit the market in response to gains and losses D Because firms operate below the average cost curvearrow_forward
- In a perfect competitive industry, the market price is R20. An individual firm produces output at which MC=R25. What should the firm do to maximise profits or to minimise losses in the short run? A. they should leave the output unchanged. B. they should increse production. C. they should decrease production. D. they should shut down.arrow_forwardExplain in detail how purely competitive markets, in the long-run, know how to adjust to and provide the correct output, at the correct price. Give an example of a good or service you might buy that is closest to being in a purely competitive market. Explain your logic.arrow_forwardIf the pandemic causes firms in a competitive industry to spend $100,000 per month on safety measures (regardless of the output level), the firms bear this cost in the short-run, but consumers bear it in the long-run. True or false and explain in detail. Use graphs if needed.arrow_forward
- Multiple choice - microeconomics 41) Where is the competitive firm’s short-run supply curve located? A. the part of the average-variable-cost curve that lies above marginal cost B. the part of the marginal-cost curve that lies above average variable cost C. the part of the average-total-cost curve that lies above marginal cost D. the part of the marginal-cost curve that lies above average total cost 40) For any given price, a firm in a competitive market will maximize profit by selecting the level of output where price intersects which curve? A. marginal-revenue curve B. average-variable-cost curve C. marginal-cost curve D. average-total-cost curvearrow_forward[TRUE / FALSE] Please explain In the real-world, marginal cost curve is usually U-shaped.Therefore, in a perfectly competitive market, a firm can maximize profit at two different output levels in the short-runarrow_forwardClaude's Copper Clappers sells clappers for $65 each in a perfectly competitive market. At its present level of output, Claude's marginal cost is $65, average variable cost is $45, and average total cost is $67. To maximize his profit or minimize his loss, Claude should _____ Group of answer choices shut down. increase output. reduce output but not to zero. raise the price. continue producing the present level of output.arrow_forward
- You are the manager and selling your product in a perfectly competitive firm market. Your firm and other firms sell the product at a price of RM 90. Your cost function is C(Q) = 50 + 10Q + 2 Q2. What level of output should you choose to maximize profits? What are your firm’s short run profits? What will happen in your market in the long run? Explain.arrow_forwardA company in a perfectly competitive market produces an output level Q = 100 where marginal revenue is equal to marginal cost and has the following revenue and cost levels: Marginal cost curve intersects the average variable cost curve at $150. Marginal cost curve intersects the average total cost curve at $200. Marginal cost curve intersects the marginal revenue curve at $170. At Q = 100, ATC = $210 and AVC = $155 At this output of Q = 100, calculate: total revenue (TR), total cost (TC), variable cost (VC), and fixed cost (FC). Show your work (formulas and calculations)arrow_forwardGood Grapes is selling grapes in a purely competitive market. Its output is 5,000 pounds, which it sells for $5 a pound. At the 5,000-pound level of output, the average variable cost is $4.00, the marginal cost is $4.25, and the average total cost is $4.50 a pound. Should the firm increase output, decrease output, or not produce? Why? How should the firm determine the optimal level of output?arrow_forward
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