Suppose 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.
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- The graph below shows the marginal cost (MC), average variable cost (AVC), and average total cost (ATC) curves for a firm in a competitive market. These curves imply a short-run supply curve that has two distinct parts. One part, not shown, lies along the vertical axis (quantity-0); this represents a condition of production shutdown. Where is the other part? Use the straight-line tool to drawit. To refer to the graphing tutorial for this question type, please click here Price and cost 18 15 14 13 12 10 19/21 SUBMIT ANSWER 13 OF 21 QUESTIONS C OMPLETED 28 MacBook Pro 금□ F7 F8 F9 F1o F2 F3 F5Assume that a firm in a competitive market faces the following cost information. If the market price for this firm's product is $40, calculate the profit maximizing level of output for this firm using marginal analysis. It may help to create your own cost table and fill in columns for Marginal Cost and Average Total Cost based on the Total Cost information below. a.What is the level of profit for this firm at the profit maximizing output? b.To convince yourself that the quantity you found is indeed the profit maximizing quantity, try calculating what the profit would be at the next higher level of output. What did you find? c. What do you predict will happen in this market over the long run?What does zero economic profits in the long-run mean to the owner of a business operating in a perfect competitive market?
- For the following, decide whether you agree or dis-agree and explain your answer: a. A firm earning positive profits in the short run always has an incentive to increase its scale of operation in the long run. b. A firm suffering losses in the short run will continue to operate as long as total revenue at least covers fixed cost.“In a perfectly competitive market, firms always operate at the lowest per-unit cost." Is the preceding statement true or false? Explain your answer.Juan makes dining room chairs in a perfectly competitive industry. He is looking for economic advice and tells you the following data about his business. (Assume cost curves have their standard shapes.) Total revenue is $120,000, Total fixed costs are $100,000 Total variable costs are $110,000 Marginal cost is $200/unit Quantity produced is 600 units What will you suggest to Juan? A: Shut down immediately B: Do not shut down and increase production C: Do not shut down but decrease production D: Do not shut down and do not change the current production level.
- What is the relationship between marginal cost and the short-run supply curve for the purely competitive firm?Will a profit-maximizing firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation.The graph shows the cost curves for a perfectly competitive firm. If the market price of the product is $1.25 per unit, then the firm will earn how much profit per unit in the short run?
- According to marginal analysis, a perfectly competitive firm will produce an output level where what is true about its Marginal Revenue and its Marginal Cost?The Economy Tomorrow Using the following graph as a reference, what will be the effect of a successful advertising campaign on the firm's cost, demand, and marginal revenue curves? MC ATC Demand Quantity (units per period) Marginal cost will (Click to select) Average total cost will (Click to select) Demand will (Click to select) Marginal revenue will (Click to select) Price or Cost (dollars per unit)In the long run, perfectly competitive firms make zero economic profit. If this is the case, why does the firm even bother producing? Why not exit the market completely?
