Profit maximizing condition under competitive market is P=MC.
(a) When P=$8 , then profit maximizing quantity is approximately 4 units.
(b) Profit is represented by the rectangle area above ATC and below the price at the profit maximizing quantity. It is shown in the below graph:
(c) If the price falls to $5. Then, we can see that profit maximizing quantity is approximately 2.5 units . At this output level P<ATC but P>AVC , so firm will continue to produce in the short run.
In the long run , because firms earning negative profit ,therefore firms exit the market.
2) For the following firm in a competitive market, a) What is the profit maximizing quantity...
Total Revenue Marginal Revenue 1) For the following firm in a competitive market, COSTS REVENUES Quantity Total Marginal Quantity Produced Cost Cost Demanded Price SO $80 $50 $80 $102 $80 $157 $80 $217 SSO $285 $80 $365 $80 $462 $80 8 $582 IS $80 a) Fill the column for marginal cost, total revenue and marginal revenue. b) What is interesting about the numbers you find for marginal revenue. c) Based on profit maximization rule that you learned in Chapter 14...
1. Draw two graphs. On the first, show the short-run profit maximizing output of an individual firm earning an economic profit, including MR, MC, AVC, and ATC. On the second, show the short-run market equilibrium price and quantity. Explain how the industry supply curve and the market equilibrium price and quantity are determined. 2. What is the relationship between the price on the two graphs? Why does this relationship exist? 3. Explain why a firm in a perfectly competitive industry...
The following graph shows the demand and cost curves for a perfectly competitive firm. The profit-maximizing firm will: MC ATC // AVC Multiple Choice shut down. ο produce with short-run losses. O produce with long-run economic profits. ο produce with short-run economic profits.
Figure 14-2 The figure below depicts the cost structure of a profit-maximizing firm in a competitive market. Costs MC ATC AVC Quantity Refer to Figure 14-2. If the firm is in a short-run position where PAVC, it is most likely to be on what segment of its supply curve? O DE CD О вс AB
8. Refer to the graph above depicting a perfectly competitive firm. When maximizing profit, the total profit earned by the firm represented is: A. $220. B. $275. C. $330 D. $605, 26. Refer to the graph above of a monopolistically competitive firm. If the firm maximizes profit, it will earn: A. zero economic profit this year. B. $320,000 economic profit this year. C. 584,000 economic profit this year. D. $56,000 economic profit this year. ATC AVC - 01 02 03...
For a perfectly competitive market made up of firms represented in the graph below, what is the long run equilibrium price of the good? Cost ($) MC ATC AVC $16 $14 $12 $10 Quantity $14 $10 $12 $16 For a perfectly competitive market made up of firms represented in the graph below, if the price is $14, Cost ($) MC ATC $16 AVC - $14 $12 $10 Quantity The firm is operating at its minimum long run average total cost....
This question is in regards to situations that might face a perfectly competitive firm. Draw two graphs. On the first, show the short-run profit maximizing output of an individual firm earning an economic profit, including MR, MC, AVC, and ATC. On the second, show the short-run market equilibrium price and quantity. Explain how the industry supply curve and the market equilibrium price and quantity are determined.
Use the MR/MC approach and the appropriate graph to show the profit maximizing price and quantity for a firm in monopolistic competition. Assume that the firm is making economic profits in the short-run. Explain what happens to the economic profits in the long-run.
7. A profit maximizing firm in a competitive market produces replica toy cars. Suppose the market price for replica toy cars decreases to $12. At the profit maximizing (loss minimizing) quantity of 20,000 toy cars, the ATC is equal to $15 and the AFC is equal to $5. Given these conditions the (x) firm will experience losses of $60,000 since price is less than average total cost. (y) the firm will continue to produce 20,000 toy cars since it would...
2. In a perfectly competitive market, there are initially economic profits. Firm entry causes the market supply curve to shift rightwards, but the market does not reach its long run state. a. Draw two corresponding graphs, side-by-side, that allustrate this shift. One is the market supply and demand graph, and the other is the profit-maximizing production choice of a typical firm. Using your graph, explain b. How do price and marginal revenue change as firms enter c. How do MC...