PRIN OF MICROECONOMICS
2nd Edition
ISBN: 9780393914085
Author: coppock
Publisher: Norton, W. W. & Company, Inc.
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Question
Chapter 9, Problem 7SP
(a)
To determine
Identify the firm with a loss of $5,000 and a fixed cost of $8,000 operating in the short run or not.
(b)
To determine
Identify the firm that operates in the long run or not.
(c)
To determine
Identify the changes in the firm’s short-run and long-run decisions, if its fixed costs are $2,000.
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Consider a firm that has no fixed costs and that is currently losing money. Are there any situations in which it would want to stay open for business in the short run? If a firm has no fixed costs, is it sensible to speak of the firm distinguishing between the short run and the long run?
A profit-maximizing firm is producing where MR = MC and has an average total cost of $4, but it gets a price of $3 for each good it sells.a. What would you advise the firm to do?
The firm should shut down in the short run and exit the market in the long run.
The firm is producing where MR = MC, so it should produce in both the short run and long run.
As long as average variable costs are less than $3, in the short run, the firm should produce. In the long run, it should exit the market.
The firm should shut down in the short run. Once the firm recoups its fixed costs, it should produce in the long run.
b. What would you advise the firm to do if you knew average variable costs were $3.50?
The firm should exit the market in the long run, but it should produce in the short run since it is covering average fixed costs.
The firm should shut down in the short run. Once the firm recoups its fixed costs, it should reopen in the long run.
The firm…
A firm in a perfectly competitive industry knows the following about its costs and revenue. The firm would like to maximize
profit and has hired a consultant for advice.
Price
Q of Output
Total Revenue
Total Cost
Total Fixed Cost
10
500
TR?
9,400
TFC ?
Total Variable Cost
Average Total Cost
Average Variable Cost
MC
6,500
is at minimum level
AVC?
MC?
Total Revenue Number
Total Fixed Cost Number
Average Variable Cost Number
Marginal Cost Number
What is the value of the profit or loss (-) at the current output ( include the - sign if it's a loss) Number
Consultant's Advice: As a consultant, what advice would you give to this firm:(Choose ONE answer from the
following)
Number
1. Firm should do nothing; it is already profit maximizing/loss minimizing
2. Firm should reduce quantity of output
3. Firm should increase quantity of output
4. Firm should shutdown operations
5. The given number set is inconsistent
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