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2. Show graphically and explain why a firm with u-shaped AVC cost curve will produce when...
Consider a firm facing conventional technology with U-shaped AVC and ATC and MC. The firm wants to maximize profits given an exogenously fixed price of P = $20. Further, suppose the firm correctly determines that its short run profit maximizing output is 1000 given its costs and the exogenously fixed price of $20. Question 1A Using the axes as constructed below, depict marginal revenue and marginal cost curves that would support the conclusion that the optimal short run output is...
Joe owns a firm with a conventional production function resulting in U-shaped ATC, AVC, and MC curves. Suppose that petroleum energy is a major component of the variable costs for Joe’s firm. Graphically depict, with proper labels, the AFC0, AVC0, ATC0, and MC0 curves for this firm. Recent events in the energy arena have caused oil prices to fall significantly. Graphically depict the impact of these lower oil prices on each of the 4 cost curves mentioned in part (a)....
In the short run, there are many U-shaped cost curves. Which of the following explains why the ATC is that way in the short run? It is U-shaped because the minimum efficient scale is achieved. It is U-shaped because the AFC declines as more goods are produced. It is U-shaped because of economies and diseconomies of scale. It is not U-shaped. It is U-shaped because of increasing and decreasing returns. If a firm is experiencing economies of scale, what is...
If a firm has a U-Shaped long-run average cost curve, a.) its fixed cost rises as output rises. b.) it must have increasing returns to scale at low levels or production and decreasing returns to scale at high levels of production. C.) it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production. D.) the firm can maximize its output by operating at the point of minimum...
--The SR Market Supply Curve As long as P ≥ AVC, each firm will produce its profit-maximizing quantity, where MR = MC. At each price, the market quantity supplied is the sum of quantities supplied by all firms. Explain and give an example
marginal cost curve may be U-shaped. As a result, the MC curve may hit the firm's demand curve or price line at two output levels. Which is the profit maximizing output? Why
Clearly explain the shape of the marginal cost curve. (Don't just say how it's shaped, explain why we model it with that shape.)
“business executives do not perceive the textbook U-shaped marginal cost curve to relevant in many situations”. Drawing on your experiences, do you agree or disagree? Why?
The curves show the marginal cost (MC), average variable cost (AVC) and average total cost (ATC) curves for a firm that sell mid-range cars in a competitive market. Use the area tool to draw the area representing the firms profit or loss, if the firm produce 6000 cars. Your answer should be a rectangle drawn with four corners When the firm produce 6000 cars it earn a profit or suffer a loss of ----- million
1. Consider the following cost curve diagram for an airline (MC is marginal cost, AVC is average variable cost, and AC is full average cost). Quantity is measured in number of passengers. MC AC AVC 600 700 800 1000 a) What is the minimum price where a new airline would enter the industry (2) b) If price is $400, what are profits? (2) c) Consider an airline that is in business. What is the minimum price where the airline would...