Question

Recall that in perfect competition a firm’s demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total costs are:

ATC D7 AV¢1 6 12 18 24 30 36 42 48 54

Group of answer choices

$720

$660

$576

$432

2.

Refer to the graph below. Total profit is:

ATC D7 AV¢1 6 12 18 24 30 36 42 48 54

Groupof answer choices

$243

$144

$288

$132

3.

Refer to the diagram below. Based on the information illustrated in this graph, which of the following is an accurate statement?

Group of answer choices

Profits will be reduced by expanding production to the zone where MC exceeds MR.

Production should keep expanding because MR is always less than MC.

Because this is a perfectly competitive firm, the profit maximizing rule is not P = MC.

Because this is a perfectly competitive firm, the profit maximizing rule is not P = MR.

Answer 1

a) "C"

Total cost of the firm are 36 x 16 = $576, the answer is "C" because the quantity will be at the point were the MC and the price meet and at that output the cost is 16.

b) total revenue is 36x 20 = 720 and total cost is 576, so the profit in the market will be 144. the answer is "B".

c) "C"

Because this is a perfectly competitive firm, the profit maximizing rule is not P = MC.