Homework Answers
Question 1
(a)
Demand curve is intersecting MC curve corresponding to quantity of 129 units and price of $210 per unit.
So, for this firm, profit-maximizing or loss-minimizing quantity is 129 units and price is $210 per unit.
ATC corresponding to 129 units is $245.
As ATC>Price, firm is incurring loss.
Calculate the firm's total loss -
Total loss = (ATC * Q) - (P * Q) = (245 * 129) - (210 * 129) = $31,605 - $27,090 = $4,515
Thus,
The firm's total loss is $4,515.
(b)
The firm is producing 129 units.
The price corresponding to this output is $210 per unit.
The AVC corresponding to this output is $175.
Until, price is greater than AVC, firm should continue production in the short-run.
Price is greater than AVC. So, this firm should not shut down in the short-run.
(c)
Shtu-down price is the price which is equal to minimum AVC.
Minimum AVC is $175.
So,
This firm's shut-down price is $175 per unit.
(d)
Demand curve of this firm is horizontal straight line at the given price.
Perfectly competitive firms have horizontally straight demand curve at given price.
So,
Perfectly competitive market structure is represented by Figure 1.
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1) This monopolist earns $________profit per
unit (numeric and sign) when it maximizes its
profit.
2) What time period of production is this monopolist operating
in?
a) Short run
b) market period
c) long run
d) short or long run
3) Which of the following best describes what the monopolist
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1) This monopolist earns $________profit per
unit (numeric and sign) when it maximizes its
profit.
2) What time period of production is this monopolist operating
in?
a) Short run
b) market period
c) long run
d) short or long run
3) Which of the following best describes what the monopolist
should do in this situation?
a) Raise its price.
b) Lower its price.
c) It should...
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