Question

Help on the Microecononomics questions please

Exhibit 23-9

$ppg__cognero__Chapter_9_Perfect_Competit$

Refer to Exhibit 23-9. Suppose that the market starts out at long-run competitive equilibrium with price equal to P₁ and producing Q₁ output, and then demand increases from D₁ to D₂. As a consequence, the typical profit-maximizing firm will

a.

increase quantity produced by (q₂ - q₁).

b.

decrease quantity produced by (q₂ - q₁).

c.

decrease quantity produced by (q₁ - q₃).

d.

not change its output level because the demand curve it is facing did not change.

If all firms in an industry sell their product for the same price it is a result of

Select one:

a. collusion.

b. perfect competition.

c. a government law that specifies all firms must charge the same price.

d. a or b

e. There is not enough information to answer the question.

Exhibit 23-3

(1)	(2)	(3)
Price	Quantity Sold	Total Cost
$8	40	$274
$8	41	$276
$8	42	$280
$8	43	$285
$8	44	$293
$8	45	$302
$8	46	$312
$8	47	$325

Refer to Exhibit 23-3. What quantity of output should the profit-maximizing firm produce?

Select one:

a. 41 units

b. 42 units

c. 44 units

d. 45 units

e. 46 units

Which of the following is a characteristic of perfect competition?

Select one:

a. many sellers and few buyers

b. many buyers and few sellers

c. a heterogeneous product

d. buyers and sellers having all relevant information

e. high barriers to entry and exit

Exhibit 23-8

$ppg__cognero__Chapter_9_Perfect_Competit$

Refer to Exhibit 23-8. What is the total revenue of Firm A at the profit-maximizing (or loss-minimizing) level of output?

Select one:

a. $300

b. $700

c. $1,000

d. $400

In long-run equilibrium, the perfectly competitive firm earns __________ economic profits.

Select one:

a. positive

b. zero

c. negative

d. any of the above

Exhibit 23-10

Output (Q)	Total Revenue	Total Cost
0	$0	$10
1	25	40
2	50	60
3	75	70
4	100	75
5	125	85
6	150	110
7	175	140
8	200	180

Refer to Exhibit 23-10.  What quantity of output should the profit-maximizing firm produce?

Select one:

a. 0

b. 4

c. 6

d. 7

e. 8

Answer 1

Exhibit 23-9

a) increase quantity produced.

In long run perfect competition the firm starts with earning zero profit. As the demand increases the price increases as a result the firm's increase the quantity and start earning profits . Other firms get attracted to the industry and enter it. As a result the supply increases which results in a price fall and so the firm's earn zero profits again.

If all the firm's in an industry sell their product for the same price it is a result of-

B) perfect competition

Under perfect competition, everyone is well aware of the prices and quantity in the market.

If any firm increases the price people will not buy from them as they will have to pay more.

If any firm reduce their prices, people will rush to it to get the commodity.

Thus in perfect competition prices are same.

Exhibit 23-3

C) 44 units.

A profit maximising firm should produce that level of output at which it attains maximum profit and also it's cost is covered.

When the firm sells 41 units it earns $328 , it's cost is covered and earns a profit of $52

When the firm sells 42 units it earns $336 and earns a profit of $56

When the firm's sells 44 units it earns $352 and gains $59

When the firm sells 45 units it earns $360 and gains $48

When the firm sells 46 units it earns $368 and gains $56

Since the firm gains maximum when it sells 44 units, that is the quantity the firm should sell.

Characteristic of perfect competition -

D) buyers and sellers have all relevant information

In perfect competition all the buyers and sellers have perfect knowledge about the price and products.

Exhibit 23-8

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In long run equilibrium the perfectly competitive firm earns

B) ZERO economic profits

Exhibit 23-10

C) 6

A profit maximising firm should produce that quantity at which it covers all its cost and gets maximum profit

At zero level of output the firm only incurs cost of $10

At 4 units of output firms profit is $25

At 6 units profit is $40

At 7 units profit is $35

At 8 units profit is $20

Profit is equal to revenue minus cost.

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