HW11: Homework - Ch. 11: Costs and Profit Maximization Under Competition

From the information given in the table, calculate the marginal cost of the 3rd unit of output.

20

At which level of output will this firm maximize profits?

7

Help Mad Mildred's Magic Mall by determining the missing values in the table A: Total fixed cost with two workers per day: $ B: Total variable cost with three workers per day: $ C: Total cost with four workers per day: $

A:50 B:75 C:150

Suppose that Tyler is an entrepreneur. He works as an economic consultant, and because of his quick wit, mastery of economics, and dashing good looks, Tyler is offered a position that pays $7,000/month. Tyler declines this offer because he thinks it is less than a normal profit. What does this mean?

Tyler would have to give up the chance to earn more than $7,000/month if he were to accept this position. A normal profit refers to the profit that an entrepreneur can expect to earn in other business opportunities.

The table shows the cost and revenue information for a perfectly (or purely) competitive firm that produces external hard drives. Use whole numbers to answer the six questions.

What price does this firm charge for each hard drive?100 How many units should this firm produce to maximize profits? 14 When profit maximizing, what is this firm's profit?1000 What level of output would yield the lowest profits?17 What is the marginal revenue received from the 11th unit?100 What is the marginal cost of producing the 11th unit?38

The accompanying graph depicts the Marginal Cost (MC), Average Cost (AC), Marginal Revenue (MR), and Demand (D) curves for a competitive firm. a. Move point E to the profit maximiznig price and quantity on the graph. b. What price should this firm charge to maximize profit? c. How many units should this firm produce to maximize profit?

a: 12,12 b:12 c:12

What is the primary difference between accounting profits and economic profits?

accounting profits ignore implicit costs; economic profits consider them.

Economic costs and accounting costs differ because economists include

both explicit and implicit costs.

Russ owns a fried chicken stand at the local beach. In calculating how much he earns from his business, Russ notices a difference between his economic and accounting profits. Why would Russ' economic profits differ from his accounting profits?

he may have implicit costs associated with operating the chicken stand in addition to explicit costs.

The marginal cost curve may decrease at low quantities, but soon it starts to increase. The increase is explained by

increasing difficulty and cost of production.

Economic costs and accounting costs differ because accountants include

only explicit costs.

Consider the graph, which depicts a single competitive firm that wishes to maximize profits given its costs of production. a. What is the profit‑maximizing rule for this firm? A profit‐maximizing firm will

produce a level of output such that marginal revenue equals marginal cost.

Marginal cost is defined as

the change in total cost from producing one more unit of output.

Economic profit is

typically lower than accounting profit.