Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 10.3, Problem 2QQ
To determine
Changes in marginal cost and marginal revenue.
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A profit-maximizing firm in a competitive market is currently producing 500 units of output. It has
average revenue of $10, average total cost of $8, and fixed costs of $200. a. What is its profit? b.
What is its marginal cost? c. What is its average variable cost? d. Is the efficient scale of the firm more
than, less than, or exactly 100 units?
Firms experience a break even point when
a. Total revenue is greater than total cost
b. Marginal cost os equal to marginal revenue
c. Average fixed cost is equal to average variable cost
d. Marginal revenue is zero
i. Calculate the marginal cost, marginal revenue and profit for each unitof production. ii. How many units should the firm produce to maximise profit?
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- Marginal profit is negative when A. output exceeds the profit-maximizing level. B. total cost exceeds total revenue. C. marginal revenue is negative. D. profit is negative.arrow_forwardIf a firm's profit margin is negative, this means that: a. The average cost is above the price. b. The price is below the marginal cost. c. The firm is making losses for all levels d. All options are correct.arrow_forwardPrice, P (dollars per pound) 10 0 QUESTION 5: COST STRUCTURES Feasible set 20,000 40,000 60,000 Quantity of Cheerios, Q (pounds) ● Isoprofit curve: $60,000 ● Isoprofit curve: $34,000 Isoprofit curve: $10,000 Isoprofit curve: $0 Demand curve 80,000 The figure to the left shows the isoprofit curves and demand curve for Cheerios breakfast cereal. Draw a diagram to show how the figure would change in each of the following cases. To make sketching the curves easier, assume the demand curve is linear. In each case, can you say what would happen to the price and the profit? a) A rival company producing a similar brand slashes its prices. b) The cost of producing Apple-Cinnamon Cheerios rises to $3 per pound. c) General Mills introduces a local advertising campaign costing $10,000 per week.arrow_forward
- What is true with profit maximization of the firm using the Total Revenue Total Cost approach? PLEASE EXPLAIN A. The only requirement to find the optimal output that maximizes economic profit is that the difference between the total revenue and the total cost is the highest B. The total revenue should be lower than the total cost C. The total revenue should be higher than the total cost D. A and B are correct E. A and C are correctarrow_forwardPlease solve Fast i give 2 like Which of the following is not true according to Figure 1? Hide Transcribed Text Figure 1: Cost and Price AC : Average Cost, AVC: Average Variable Cost, and MC: Marginal Cost A) The firm earn a zero economic profit when it produces 40 unit at the price of $5.7 per unit. B) The minimum acceptable price (the shut-down point) is $4.3 per unit. C) The firm's supply curve is its MC curve above minimum of AVC. D) The firm earns an economic profit when the price exceeds $4.3 per unit.arrow_forwardSuppose fixed costs are $10,000, variable costs are $40,000 and the price of the good is $10 and quantity of the good the firm sells is $10,000. A. Caluclate Total Costs. B. Caluclate Total Revenue. C. Calculate the Firm's Profits.arrow_forward
- In the short run a firm should shut down when; A. When price is below MC B. When price is below minimum point of AVC C. When it is not earning a positive economic profit D. It is incurring a lossarrow_forwardLaura’s cleaning service is a profit-maximising, competitive firm. Laura cleans awhole house for $156. Her total cost each day is $1680, of which $480 is a fixed cost. She cleans 8 houses a day.(a)Should Laura shutdown her business in the short-run, assuming that she cannot recover her fixed cost?(b) Should she exit in the long-run?arrow_forwardCost MC Select one: ATC AVC ABC D Quantity C in the figure above represents the output level where the firm Quantity a. maximizes profits in the short-run. b. minimizes total costs in the short-run. C. maximizes profits in the long-run. d. minimizes marginal costs in the long-run. e. None of the above.arrow_forward
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