Homework Chapter 8

The market price for tennis balls is currently $2 At this price, a firm is willing and able to produce 80 tennis balls. However, at this level of production, the firm experiences an average total cost of $0.50 per tennis ball. What is the profit for this firm?

$120

A firm selling jet skis produces 18 jet skis and sells them at a price of $12,500 each. If the average total cost to produce 1 jet ski is $4,500 at this output level, what is the firm's profit?

$144,000

Determine the market price that Firm A receives for its product. Assume the price is constant because the firm is a price taker in a perfectly competitive market.

P=$28

When price is _______ average cost of production, profits are ______ due to a ________ profit margin.

Above; positive; positive

Which of the following does not apply to an industry's market structure? A. How many sellers are in the market B. How easy or difficult it is for a firm to enter the market C. The type of products sold in the market D. Who the CEO of the largest company is

D. Who the CEO of the largest company is

Calculate the marginal revenue for Firm ABC's sales of toothbrushes by using the data in the table below. Assume the toothbrush industry is in perfect competition Total revenue - revenue / highest quantity - lowest quantity

MR= $9

Firm B's costs are represented in the figure below. At what price will firm B shutdown immediately?

Price = $30

Jill has a lemonade stand. Her total cost of producing 100 glasses of lemonade is $200. If Jill can sell 100 glasses of lemonade at a price of $5 per glass of lemonade, what is her total profit?

Profit $300 cost of producing $2 a glass Charging $5 a glass = $3 profit per glass 100 glasses x $3 profit = $300

Take a look at the graph below. The shutdown point for this firm is at which quantity? Enter the letter of the point in the answer box.

Q

The table below represents a firm's profit for producing and selling flags. Assume that if a firm would have the same profit at two different levels of output, then the firm would choose the greater level of output. Assume that the only levels of output that the firm can produce are the levels of output given in the table. At what level of output does the firm maximize profits?

16 flags Reason: The profit-maximizing output choice for a perfectly competitive firm occurs at the level of output where marginal revenue is equal to marginal cost,

According to the graph below, between what range of output (Q) will Firm X earn profit?

Between Q=5 and Q=25

In the graph below, what does the shaded area represent? Marginal revenue less than average total cost

Economic loss

The figure below represents the cost curves for Firm J. What is the shutdown point for Firm J?

Price = $50 Quantity =70

(T/F) Firms make decisions regarding how to operate based on an industry's market structure.

True

(T/F) The shaded area below the average cost curve represents economic loss.

True

The table below provides revenue and cost information for a perfectly competitive firm producing paper clips.

change in total revenue / change in quantity 5,000−1,000/100,000−20,000=4,000/80,000=0.05

If a firm's total revenue is equal to $1,050 and its total costs are equal to $2,000, then what are its profits (or losses)?

p= 1050 - 2000= -950

What are two reasons a business may exit from the market? Select two answers - losses made in the long-run - profits made in the short-run - unproductive workers - increased industry profits

- losses made in the long run - unproductive workers

This table provides revenue and cost information for a perfectly competitive firm producing paper clips. What is the marginal revenue of producing paper clips?

$0.05

The table below represents a firm's profit for producing and selling candles. Assume that if a firm would have the same profit at two different levels of output, then the firm would choose the greater level of output. Assume that the only levels of output that the firm can produce are the levels of output given in the table. At what level of output does the firm maximize profits?

60 candles Reason: The profit-maximizing output choice for a perfectly competitive firm occurs at the level of output where marginal revenue is equal to marginal cost. The candle firm maximizes profits at 60 candles.

The table above shows a demand schedule for a product produced by a monopolist. At which price is the total revenue the highest? Multiply each line ex: 2x20=40 4x16= 64 6x12= 72 8x8=64 10x4= 40

P=$6

For a firm, what is the name of the point in which the price the firm receives per item is exactly equal to its average cost of production?

Break even point

The graph below shows price and average cost for a perfectly competitive firm. Which of the following is true about this firm's current economic profit?

Economic profit is zero

T/F Exit occurs in response to increase industry profits.

False

T/F Because of market pressures, monopolies frequently demonstrate allocative efficiency.

False Reason: Monopolies do not need to respond to market pressures, and have no incentive to demonstrate allocative efficiency Allocative efficiency: represents consumer preferences

In the graph below, the shaded area represents economic loss. Select the collect answer below:

False Reason: The shaded area represents economic profit. This is because the market is perfectly competitive so marginal revenue is the same as price. At the quantity where marginal revenue intersects marginal cost, price is greater then average total cost. Therefore, the firm is making a profit. The area of the rectangle gives total profit since...

Consider a firm that sells lamps in a perfectly competitive market. As its sales go up from 10 lamps to 11 lamps, its total revenue increases from $500 to $550. What is the marginal revenue of this firm?

MR=$50

Consider that a market is in long-run equilibrium and demand decreases. Select two answers that will occur as a result of a decrease in demand. - Market prices begin to increase - Market prices begin to fall - Market prices remain above the average cost (AC) curve - Market prices will fall below the average cost (AC) curve

Market prices begin to fall Market prices will fall below the average cost (AC) curve

If Big Burger Co. is trying to determine the shutdown point of their company based on this graph, what price represents their shutdown point?

P= $20

The table above shows the demand for gum faced by Healthy Gum Company. Determine which price will provide the highest total revenue. What is the maximum revenue at this price?

P= $3 Marginal Revenue = $18

The table below represents the marginal revenue in various quantities for boxes of cereal sold. Using the table, determine the price of 1 box of cereal.

P= $3.5

Firm B has been suffering losses so it plotted its current cost curves on the graph below to see how bad it is doing. They have decided to close their doors. What is their shut down point?

Price =$4 ,Q= 4

It costs a firm that sells blueberry jam $6 to sell a single jar of jam. This firm makes $10 in revenue from each jar of jam it sells. If this firm is in a perfectly competitive market and sells 10 jars of jam, what is its total profit?

Profit = $40 cost of producing $6 a jar Charging $10 a jar = $4 profit per glass 10 jars x $4 profit = $40

At a price of $10 a firm is willing to sell 100 units of output. At this level of output, it costs the firm an average of $10 to produce a unit of output. What is the total profit of the firm?

Profit= $0 ($10-10) * 100=0

Company Econislife sells boxes of hair brushes and exists in a market with perfect competition. The table above represents total revenue (TR) in dollars for Econislife as well as marginal revenue (MR) in dollars for various quantities of boxes sold. Complete the table to help Econislife determine their TR and MR if they sold a quantity (Q) of 1, 2 or 3 boxes of brushes.

Q= 1 MR = $6, Q= 2 TR = $12 MR = $6, q= 3 TR = $18 MR= $6

Calculate the profits for company Econislife based on the figures in the table below. What is the profit-maximizing level of output? What is the profit at this quantity?

Q= 4, profit = $40

The table below represents the number of cups of lemonade, Melissa, of Melissa's Lemonade Stand, might sell and the total revenue and total costs for those quantities. Which quantity will provide Melissa with the most profits?

Q= 70 cups

According to the graph below, profit losses occur when quantity exceeds what value?

Q=3

The company Econislife is deciding what output level will provide profit-maximization. According to the graph below, what level of output will maximize profit?

Q=40 Reason: Profit is maximized when total revenue is furthest above the total cost on a graph. At an output of $40 units profit is greatest; the output of $40 maximizes profits.

According to the graph below, what is the minimum quantity (Q) at which this firm must produce to not have profit loss?

Q=5 Total revenue is equal to total cost at Q=5

If company Econislife produces between quantities ____ and _____ they will make a profit.

Quantities 10 and 35

In a perfectly competitive market, an orange costs $2. If Farmer Joe sells 10 oranges, what is his total revenue? If he decides to sell 1 more orange, what will be the marginal revenue?

TR = $20, MR= $2

When considering long-run adjustments, which of the following is not a characteristic of an increasing cost industry? A. the equilibrium price increases in response to an increase in quantity. B. the long-run supply curve is upward sloping C. the long-run supply curve is downward sloping. D. an increase in demand is met with an increase in quantity supplied.

The long-run supply curve is downward sloping

T/F Economists would say that when the net benefits of all economic activities are maximized, the allocation of resources is efficient.

True

T/F If a firm is unable to cover its fixed costs in the long-run, then the firm must exit the market.

True

T/F In an increasing cost industry, the equilibrium price increases in response to an increase in quantity.

True

T/F In a perfectly competitive market, the industry supply curve is equal to the marginal cost curves of the individual firms that make up that industry.

True Reason: If input costs change a firm's variable costs, its average total cost curve will reflect these changes. Any change in marginal cost produces a similar change in industry supply, which can be found by adding up the marginal cost curves for individual firms.

If a firm's total revenue is equal to $800 and its total costs are equal to $472, what are its profits?

p = $800 - $472 = $328 Profit = Total Revenue - Total Costs