2. Suppose a perfectly competitive firm's current output level is less than its profit-maximizing output level. The next unit produced a. will increase cost more than it increases revenue. b. will increase revenue more than it increases cost. c. will increase revenue without increasing cost. d. may or may not increase profit.
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- 22. Which one of these will continuously increase as more products are produced? a. None of the choices b. Variable cost c. Average fixed cost d. Fixed costWhen a firm is operating at its minimum efficient scale, its: a. marginal revenue is less than the marginal cost. b. total revenue is just equal to the total cost. c. long-run average cost of production is minimized. d. short-run average total cost of production minimized. e. long-run marginal cost of production is minimized.What is the law of diminishing returns? Why does marginal product eventuallydiminish?b. Explain the relationship between marginal product and average product. Lin’s makes fortune cookies. Anyone can make and sell fortune cookies, so thereare dozens of producers. All fortune cookies are the same and buyers and sellersknow this fact. In what type of market does Lin’s operate? What determines theprice of fortune cookies? What determines Lin’s marginal revenue?d. What is the shape of the AFC curve and why does it have this shape?
- i. Calculate the marginal cost, marginal revenue and profit for each unitof production. ii. How many units should the firm produce to maximise profit?1. Draw the following for a firm in a competitive industry. Assume that the firm faces diminishing marginal product at some point. Remember to label all curves and axes. a. Fixed cost and average fixed cost. b. Marginal cost c. Average variable cost and average total cost. d. Identify the price ranges that will induce entry, exit and shutdown assuming all firms face identical cost curves. e. Assuming firms are producing at minimum efficient scale, draw the industry long run supply curve in parallel with or in reference to the firm level curves from above. 2. A major proposed industry in the future is the provision of global satellite wifi. However, the actual willingness to pay for such a service is unknown. Assume there's a 40% chance that there are 1 billion people willing to pay $100/year for a service that would cost $60/year to provide and a 60% chance that those people would be willing to pay $10/year for a service that would cost $60/year to provide. Assume that the enterprise…A profit-maximizing firm in a competitive market is currently producing 500 units of output. It has average revenue of $10, average total cost of $8, and fixed costs of $200. a. What is its profit? b. What is its marginal cost? c. What is its average variable cost? d. Is the efficient scale of the firm more than, less than, or exactly 100 units?
- Question 1 a. Draw the marginal cost and average total cost curves for a typical firm. Explain why the curves have the shapes that they do and why they cross where they do. b. Does a competitive firm's price equal its marinal marginal cost in the short run, in the long run, or both? Explain c. What is the law of diminishing returns and what does it imply about the shape of the firm's average variable cost and marginal cost curves. d. Using the table below indicate which firm has (i) disc.nomiesof scale and (ii) constant returns to scale over the entire range of output. Explain your answer Question 2 a. Apple faces competition from many other firms in the owrld market for mobile phones; therefore, apple cannot have market power. Do ou agree with this statement? b. the mrginal revenue for a perfectly competitive firm is equal to the market price. Why is this not the case for a monopolist? c. A social cost is applied to the monopolist market structure. Why does this occur?…When are you are you expecting companies to produce in the short run?A. costs equal equal revenueB. price equals marginal revenueC. Average costs equal marginal costsD.marginal revenue equals marginal costCost MC Select one: ATC AVC ABC D Quantity C in the figure above represents the output level where the firm Quantity a. maximizes profits in the short-run. b. minimizes total costs in the short-run. C. maximizes profits in the long-run. d. minimizes marginal costs in the long-run. e. None of the above.
- I. A company produces at an output level where marginal cost is equal to marginal revenue and has the following revenue and cost levels: Total revenue = $1,450 Total cost = $1,500 Total variable cost = $1,300 What would you suggest? a. Shut down. b. Continue to produce because the loss is less than the total fixed cost. c. Increase production to lower the marginal cost. e. Raise the price. II. At current long-run production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. If the market is perfectly competitive, the firm should a. cut back on production. b. stop production all together. c. produce more. d. continue producing at current levels.(1) Use the graph to answer the question below. The quantity is measured in thousands of units. What will this firm decide to do in the long run? A-It will stay in the market because the price is above its AVC at its profit-maximizing output. B-It will leave the market because the price is below its ATC at its profit-maximizing output. C-It will increase its price to point B to earn normal profit. D-It will increase its output until its profit-maximizing output level is equal to B. E-Insufficient data to determine. (2) A dairy farmer is operating in a perfectly competitive market. The market price for milk is between the farmer's average variable cost and average total cost at the profit-maximizing level of output. What will the farmer do? A-Produce more milk. B-Produce less milk. C-Shut down in the short run. D-Operate in the short run and leave the industry in the long run. E-Insufficient information to determine (3) A firm operating in a perfectly competitive market cannot…Firms minimize costs; thus, a firm earning short-run economic profits will choose to produce at the minimum point on its average total cost curve. Do you agree or disagree with this statement? A. Disagree: Firms earning profits will produce to the right of the minimum point on the average total cost curve. B. Disagree: A firm minimizing costs will produce where marginal cost equals the average total cost of production. C. Disagree: Firms earning short-run profits will produce where the difference between price and MC is largest. D. Disagree: The minimum point on the average total cost curve is when output equals zero. E. Agree: Since firms seek to minimize costs, they will always produce at the minimum point on the ATC curve.