The following graph shows the marginal revenue (MR) and marginal cost (MC) curves of an imperfectly competitive firm. Figure 9.2 I Price (dollars) 150 120 18 110 100 80 70 60 10 20 20 35 50 75 90 Quantity MC MR Refer to Figure 9.2. If the current production level is 90 and the firm wishes to maximize profit, it should: continue to produce at the current level.
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- Why will losses for firms in a perfectly competitive industry tend to vanish in the long run?The table shows some cost data for Frank's Fortune Cookies which operates in a perfectly competitive market. At a market price of $42.83 a batch, what quantity does Frank's produce and what is the firm's economic profit in the short run? When the market price is $42.83 a batch, Frank produces batches of cookies. When Frank produces 6 batches of cookies, Frank's economic profit is $ Total Average Average product (batches fixed cost variable Average cost total cost Marginal cost per day) (dollars per batch) 1 77.00 45.00 122.00 31.00 2 38.50 38.00 76.50 23.01 3 25.67 33.00 58.67 20.99 4 19.25 30.00 49.25 26.00 5 15.40 29.20 44.60 33.98 6 12.83 30.00 42.83 51.02 7 11.00 33.00 44.00 77.04 8 9.63 38.50 48.13Q23 Suppose a perfectly competitive firm is currently operating with the following information: Output = 1500 tonnesAverage total cost = $627 per tonneAverage variable cost = $614 per tonneMarginal revenue = $620 per tonneMarginal cost = $620 per tonneAt the current level of output, this firm is _____ profit and is an earning economic profit of _____. a. Maximising; -$10500. b. Not maximising; -$10500. c. Maximising; $10500. d. Maximising; $9000. e. Not maximising; -$9000.
- Cost figures for a hypothetical firm are given in the following table. Use them for the exercises below. The firm is selling in a perfectly competitive market. Output Fixed AFC Variable AVC Total ATC MC Cost Cost cost 1 $50 50/1=50 $30 30/1=30 30+50=80 80/1=80 NA 2 $50 50/2=25 $50 50/2=25 50+50=100 100/2=50 (100-80)/(2-1)=20 3 $50 50/3=16.67 $80 80/3=26.67 50+80=130 130/3=43.33 (130-100)/(3-2)=30 4 $50 50/4=12.50 $120 120/4=30 50+120=170 170/4=42.50 (170-130)/(4-3)=40 5 $50 50/5=10 $170 170/5=34 50+170=220 220/5=44 (220-170)/(5-4) =50 What can you expect from an industry in perfect competition in the long run? That is, what will the price be? What quantity will be produced? What will be the relation between marginal cost, average cost, and price?Amos McCoy is currently raising corn on his 100-acre farm and earning an accounting profit of $100 per acre. However, if he raised soybeans, he could earn an accounting profit of $200 per acre. Is he currently earning an economic profit? Why or why not?Using the following graph of the cost curves for a firm. Complete the statement below. yice MC AC AVC 15 AFC Qutity Which best describes the firms short run capacity? MC = AFC MC = AVC AVC = ATC AVC = AFC MC = AC Using the following graph of the cost curves for a firm. Complete the statement below. yice MC AC AVC 15 10 AFC Qurtity Which price would best describe the firm is making an economic profit? 15 10 8 5 Using the following graph of the cost curves for a firm. Complete the statement below. yice AC AVC 15 10 5 AFC Qurtity Which price would best describe the break even point for this firm? O 15 12.5 10 16 Using the following graph of the cost curves for a firm. Complete the statement below. yice MC AC AVC 15 10 AFC Quantity Which price would best describe the shut down condition for this firm? 15 12.5 16 10 10 5 5
- Assume that the cost data in the following table are for a purely competitive producer: TotalProduct AverageFixed Cost AverageVariable Cost AverageTotal Cost Marginal Cost 0 1 $60.00 $45.00 $105.00 $45.00 2 30.00 42.50 72.50 40.00 3 20.00 40.00 60.00 35.00 4 15.00 37.50 52.50 30.00 5 12.00 37.00 49.00 35.00 6 10.00 37.50 47.50 40.00 7 8.57 38.57 47.14 45.00 8 7.50 40.63 48.13 55.00 9 6.67 43.33 50.00 65.00 10 6.00 46.50 52.50 75.00 Instructions: If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers. Select "Not applicable" and enter a value of "0" for output if the firm does not produce. a. At a product price of $56.00 (i) Will this firm produce in the short run? (Click to select) No Yes (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? (Click to select) Not applicable Loss-minimizing…Assume that the cost data in the following table are for a purely competitive producer: TotalProduct AverageFixed Cost AverageVariable Cost AverageTotal Cost Marginal Cost 0 1 $ 60.00 $ 45.00 $ 105.00 $ 45.00 2 30.00 42.50 72.50 40.00 3 20.00 40.00 60.00 35.00 4 15.00 37.50 52.50 30.00 5 12.00 37.00 49.00 35.00 6 10.00 37.50 47.50 40.00 7 8.57 38.57 47.14 45.00 8 7.50 40.63 48.13 55.00 9 6.67 43.33 50.00 65.00 10 6.00 46.50 52.50 75.00 a. At a product price of $56.00 (i) Will this firm produce in the short run? yes (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? profit- maximizing output = 9 units per firm (iii) What economic profit or loss will the firm realize per unit of output? Profit per unit = $ 16 b. At a product price of $41.00 (i) Will this firm produce in the short run? Yes (ii) If it is preferable to produce, what will be the…Use the following table and use your previous calculations: find the quantity where ATC is at a minimum and find the quantity that is the most efficient operating point for the firm. Total Output Total Cost TFC TVC AFC AVC ATC MC 0 $20 10 $40 20 $60 30 $90 40 $120 50 $180 60 $280 a. MC = ATC between 30 and 40 Quantity ATC at minimum between 20 and 40 Quantity b. MC = ATC at 30 Quantity ATC at minimum between 20 and 40 Quantity c. MC = ATC at 40 Quantity ATC at minimum between 20 and 40 Quantity d. MC = ATC between 30 and 40 Quantity ATC at minimum between30 and 40 Quantity e. MC = ATC between 20 and 40 Quantity ATC at minimum between 20 and 40 Quantity
- Calculate the amount of profit or loss made by this firm at the equilibrium output. State the type of profit.QUESTION 17 Use the following table and use your previous calculations: find the quantity where ATC is at a minimum and find the quantity that is the most efficient operating point for the firm. Total Output Total Cost TFC TVC AFC AVC ATC MC 0 $20 10 $40 20 $60 30 $90 40 $120 50 $180 60 $280 a. MC = ATC between 30 and 40 Quantity ATC at minimum between 20 and 40 Quantity b. MC = ATC at 30 Quantity ATC at minimum between 20 and 40 Quantity c. MC = ATC at 40 Quantity ATC at minimum between 20 and 40 Quantity d. MC = ATC between 30 and 40 Quantity ATC at minimum between30 and 40 Quantity e. MC = ATC between 20 and 40 Quantity ATC at minimum between 20 and 40 QuantityA firm produces a product in a competitive industry and has a total cost function (TC) of TC(q) = 90 + 10q + 2q² and a marginal cost function (MC) of MC(q) = 10 + 4q. At the given market price (P) of $16, the firm is producing 1.50 units of output. Is the firm maximizing profit?
