Econ Ch 6
at zero profit, her revenue will cover all her costs, both explicit and implicit (opportunity cost).
A producer would decide to produce in a competitive market in which she will earn zero profit in the long run because
AVC < $24
A competitive firm maximizes profit at an output level of 500 units, market price is $24, and ATC is $24.50. At what range of AVC values for an output level of 500 would the firm choose not to shut down?
operate; shut down
A firm is experiencing a loss of $5,000 per year when operating. The firm has fixed costs of $8,000 per year. The firm should _________ in the short run and should _________ in the long run.
40 The total revenue (TR) is calculated by multiplying the quantity (output) by the price ($5). MR is the difference in TR from the previous amount of production to the current amount of production. MC is calculated by taking the difference in cost between each level of output. For example, consider how to calculate the marginal cost of going from 30 to 35 units of output. The additional cost to create the additional units is 145 - 125 = 20. Profit is maximized when MR = MC.
A local snow cone business sells snow cones in one size for $5. It has the following cost and output structure per hour.
stay in business even though she is suffering a loss
Converse, an apparel company, has been fairly successful selling denim-colored college sportswear. Lydia sees an opportunity for profit and enters the market. After producing her profit maximizing level of output, she finds that her average total cost per unit is $40, her average variable cost per unit is $30, and the market price is $35. In the short run, Lydia should
entry of new firms into this market
Firms producing an identical product in a competitive market are producing at a level of output that maximizes profit. The current market price is $4.50 per unit and the firms are producing at a long-run average cost of $3.50 per unit. Over the long-run one should expect
decrease in market supply to increase the market price
If competitive firms experience a loss, over the long run there will be a(n)
continuing to produce
Profits when a competitive firm shuts down are -$7,250 and profits are -$250 when the firm continues to produce. This firm will minimize losses by
25 The price in a competitive market does not change because of one firm's actions, so it is always $16. The total revenue is calculated by multiplying price by output. The total revenue (TR) is calculated by multiplying the quantity (output) by the price ($5). MR is the difference in TR from the previous amount of production to the current amount of production. MC is calculated by taking the difference in cost between each level of output. Profit is maximized when MR = MC. The profit-maximizing output is where MC = MR, at a quantity of 25.
Suppose the firm whose demand and cost curves are represented in the table above operates in a perfectly competitive market. What is the profit-maximizing output?
should increase its output
The price of a competitive firm's product is $50 per unit. The firm currently has marginal cost equal to $40. To maximize profits this firm
corn farmers
Which of the following types of firm most closely fits the description of a competitive firm?