Critique the following statement as True or False and explain your reasoning. A profit-maximizing firm will always operate where there revenues exceed their costs.
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- Delvin has a hot dog stand in a busy midtown area with similar stands on every block. The graph above shows the cost curves of Delvin’s Hot Dogs. The market price of a hot dog is $3. Answer the questions below and show all calculations where necessary. From the diagram, what is Delvin’s profit-maximizing output per day? Explain your answer. Calculate Delvin’s accounting profit per day. How will Delvin’s price and profit change in the long-run, assuming no change in technology or demand?A perfectly competitive firm will maximize its profit when marginal revenue is greater than marginal cost. True or False?The graph attached illustrates the Demand, Marginal Revenue, Marginal Costs, Average Total Costs and Average variable Cost curves for a firm in a perfectly competitive market. What is the breakeven price? Explain your answer. What is the shot down price? Explain your answer.
- Radhika has started providing tutorial service to 10th standard students in mathematics. She charges Rs.750 per week for teaching mathematics to one student. She teaches 10 students every week. Let her weekly total cost be Rs.8000, of which Rs.1000 is fixed cost. Answer the following questions assuming Radhika's tutorial service to be a profit-maximizing competitive firm. How much profit is Radhika making in the short run? Will Radhika operate in the short run? Explain. Demonstrate Radhika's profit maximizing behaviour in a graph. Label your graph clearly There are 1000 ice cream sellers in your city with free entry and exit. Assume that each seller has an identical cost structure which remains unaffected by entry or exit of firms. Suppose the city municipal corporation decides to restrict the number of ice cream sellers to 800. How does it affect an individual ice cream seller existing in the market in the short run? Explain with graphs of the market and the individual firm What…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 inconsistentWhether firms are profit maximisers or are pursuing some alternative objective(s), many set prices, not by referring to marginal cost and marginal revenue, but by adding a profit mark-up to average cost. A firm that is a profit maximiser is likely to adjust its mark-up less frequently than a firm that is a profit satisficer. True False
- Thinking on the Margin to Increase Profitability Have you ever walked into a restaurant for lunch and found it almost empty? Why, you might ask, does the restaurant even bother to stay open? It might seem that the revenue from so few customers could possible cover the cost of running the restaurant. Provide an opinion using the concepts of sunk costs, marginal cost and marginal revenue.Match the words from the list below to complete the following statement A price taker firm will maximise by changing output, until equals marginal cost. average cost output total revenue marginal revenue marginal cost profitConsider the following costs of a typical firm in a purely competitive industry. The firm has no fixed cost given only the available information, what would you except product price to be in the long run?
- QUESTION 10 Jack sells water bottles. Assume the market for water bottles is perfectly competitive. Jack sells his water bottles at the market price of $9.00. At the profit-maximising output level of 51 water bottles, Jack's average total cost is $4.40 per water bottle. The minimum average variable cost is $3.90 per water bottle. Answer the following questions: a. Jack's economic profit or loss is decimal places (ie: to the nearest cent). (use a negative value if a loss). Answer in dollars, rounded to two b. State whether the following statement is true or false: "At the profit-maximising quantity, Jack is making an economic profit of $4.60 per water bottle." Type T for true, or F for false c. State whether the following statement is true or false: "Jack should shut down if the market price is $3.85 per water bottle." Type T for true, or F for falseNeatly draw the Average Cost Family curves below. Label everything. Assume a purely competitive firm making an economic profit. Selling Price = $10.00 Average Total cost $7.75. Q* = 300 Be sure to label everything, but also find: Total Revenue Total Cost Profit per unitSuppose you are operating a firm with a given fixed cost and product market price. If the market for your product is perfectly competitive, how will you determine your marginal cost, marginal revenue and average revenue? Explain with the help of an example.
