Question

Plastic and Co manufactures industrial plastic containers. As petroleum prices fall, the price of plastic materials also falls. As a result,

a: Plastic and Co’s marginal cost curve will shift.

b: The market price for the plastic containers will rise, other things equal.

c: The fixed cost curve for Plastic and Co would shift downward.

d: Average cost curve of plastic containers will shift upward.

When ________, a competitive firm will produce and earn economic profits.

a: marginal revenue is rising

b: marginal costs are decreasing

c: marginal revenue is above average costs

d: marginal revenue = average total cost = marginal costs

Answer 1

As Petroleum Prices fails. The price of Plastic materials also falls. Since Piastic and co manufactures industrial Proustic Containers, Plastic materials is a input for this Company And there is a decrease in Price of a material. ai a result from's Vanable cost will decrease. checking one which oftion can be True for a raw one by This change. (a) Plastic and co's marginal Cost carve will Shift Since as variable cost decrease the man of Production also decreases, due to which marginal cost curve Shifts as marginal cost Cost mc me' %

So But it is marginal cost Curve will Cost Curve will shift clown word. not mentioned in The option where it Shift So This option can be true oftion (b). market a The will shift so But lets Check for remaing. Poice for a market demand and supply demand of Price of raw materials expect That Price will decrease. Because how Cost of manufacturing containers coin has decreased which in turns increase The market supply supply. There Jore effect on prices as Price good crecided by Conclitions. Keeping Side unchanged the effect of decrease the Cound one Demand Supply supply a8 ei v 0 q (b) can not be true.

(C) as variable cost of a from decreases There is no effect on firm's Fixed cost So This (c) Can not be true. (d) Average Cost also inclucles The Average Variable Cost So as variable cost decresus firm's Average variable cost decreses reby decreses decreses The Average which in Turns Shifts The AC curve down world not up word. and thereby Cost So This can not be True. Ans: (a) Plastic will shift and co's marginal cost curve

# for a competitive firm we have a horizontal Marginal Revenue, Average Revenue and Demand Curve. as. Positive economic Profits. Revenues, MC ATC Costs ATC. MR=AR =P y zero economic Profits 0 is in fesyect com le titive market an incividual from will produce it is out put where Revenue marginal marginal (that is mR=mc ). cams The economic Profit is Less Than marginal Revenue. or marginal Revenue is above equals To Cost an Profit when ATC 8 average costs. Ans: C: marginal Revenue is above average Costs
if firms earns the zero economic profit then the option (d) is correct one but for positive economic profits option (c) is correct. As question is saying economic profits so option (c) is correct one