FIU ECO2023 Assignment HW07 Chapter 13 spring 14

1.

award:
6.25 out of
6.25 points

Question and Exercise 13-2

List three conditions for perfect competition.

Instructions:You may select more than one answer. Click the box with a check mark for correct answers and click to empty the box for the wrong answers.

	Firms’ products are differentiated.
	There are no barriers to entry.
	There are high barriers to entry.
	Both buyers and sellers are price takers.
	There is only one firm that makes up the entire market.
	Firms’ products are identical.
	Firms engage in strategic decision making.

2.

award:
6.25 out of
6.25 points

Question and Exercise 13-5

A perfectly competitive firm sells its good for $20. If marginal cost is four times the quantity produced, how much does the firm produce? Why?

Worksheet	Learning Objective: 13-02 Explain why producing an output at which marginal cost equals price maximizes total profit for a perfect competitor.	268
Question and Exercise 13-5	Section: The Profit-Maximizing Level of Output

3.

award:
6.25 out of
6.25 points

Question and Exercise 13-5 (algo)

A perfectly competitive firm sells its good for $33. If marginal cost is eleven times the quantity produced, how much does the firm produce? Why?

Worksheet	Learning Objective: 13-02 Explain why producing an output at which marginal cost equals price maximizes total profit for a perfect competitor.	268
Question and Exercise 13-5 (algo)	Section: The Profit-Maximizing Level of Output

4.

award:
6.25 out of
6.25 points

Question and Exercise 13-6

The following graphs (A?C) show the marginal cost, marginal revenue, and average total cost curves for a typical perfectly competitive firm.

a. Identify the profit-maximizing level of output for each firm in graphs A?C.

Instructions: Use the tool 'Q' to label the profit-maximizing level of output for each firm.

b. Which of the above graphs represents a typical perfectly competitive firm earning economic profits?

\

c. Which of the above graphs represents a typical perfectly competitive firm earning economic losses?



d. Which of the above graphs represents a typical perfectly competitive firm earning zero economic profit?

.

e. Which of the above graphs represents a typical perfectly competitive firm in the long run?

.



Explanation:

The profit-maximizing level of a competitive firm is where marginal revenue equals marginal cost. To find the profit-maximizing level of output for a perfect competitor, find that level of output where MC = MR. Profit is price less average total cost times output at the profit-maximizing level of output. Perfectly competitive firms make zero profit in the long run.

5.

award:
6.25 out of
6.25 points

Question and Exercise 13-9

The following graph shows marginal cost, average total cost, and average variable cost curves for a typical perfectly competitive firm.

a. Draw the marginal revenue curve to indicate this firm is in a long-run equilibrium. Then label the profit-maximizing level of output.

Instructions: Use the tool 'MR' to draw the marginal revenue curve between Q = 0 and Q = 10. Then use the tool 'Q' to indicate the profit-maximizing level of output.

b. In long-run equilibrium, this firm is earning economic profit equal to$.

Graphing	Learning Objective: 13-03 Determine the output and profit of a perfect competitor graphically and numerically.	273
Question and Exercise 13-9	Section: Total Profit at the Profit-Maximizing Level of Output

6.

award:
5.73 out of
6.25 points

Question and Exercise 13-10

Each of 10 firms in a given perfectly competitive industry has the identical costs given in the first table. The market demand schedule is given in the second table.

Firm Quantity	Firm Total Cost ($)	Firm Marginal Cost ($)
0	12	--
1	24
2	27
3	31
4	39
5	53
6	73
7	99

Price ($)	Market Quantity Demanded
16	40
14	50
12	60
10	70
8	80
6	90
4	100
2	110

Instructions: Round all answers to 2 decimal places.

a. The market equilibrium price and the price each firm gets for its product is $.

b. Equilibrium market quantity is units, and each firm will produce units.

c. Each firm will make a profit of $.

d. Firms begin to exit the market when price falls below.

Worksheet	Learning Objective: 13-03 Determine the output and profit of a perfect competitor graphically and numerically.	273
Question and Exercise 13-10	Section: Total Profit at the Profit-Maximizing Level of Output

Question #1 (of 16) Question #2 (of 16) Question #3 (of 16) Question #4 (of 16) Question #5 (of 16) Question #6 (of 16) Question #7 (of 16) Question #8 (of 16) Question #9 (of 16) Question #10 (of 16) Question #11 (of 16) Question #12 (of 16) Question #13 (of 16) Question #14 (of 16) Question #15 (of 16) Question #16 (of 16)

7.

award:
6.25 out of
6.25 points

Question and Exercise 13-12

How is a firm’s marginal cost curve related to the market supply curve?

Worksheet	Learning Objective: 13-03 Determine the output and profit of a perfect competitor graphically and numerically.	273
Question and Exercise 13-12	Section: Total Profit at the Profit-Maximizing Level of Output

8.

award:
6.25 out of
6.25 points

Question and Exercise 13-13

The following graph shows marginal cost, average total cost, and average variable cost curves for a typical perfectly competitive firm.

a. Draw the marginal revenue curve when market price is $5.50 and then label the profit-maximizing level of output. Now label the price at which the firm is earning zero economic profit. Finally, label the price at which the firm would shut down temporarily.

Instructions: Use the tool 'MR' to draw the marginal revenue curve between Q = 0 and Q = 10 and then use the tool 'Q' to indicate the profit-maximizing level of output. Now use the tool 'Zero' to indicate the price at which the firm is earning zero economic profit. Finally, use the tool 'SD' to indicate the price at which the firm would shut down temporarily.

b. In the long run, the firm will exit the market if price falls below.

Graphing	Learning Objective: 13-03 Determine the output and profit of a perfect competitor graphically and numerically.	273
Question and Exercise 13-13	Section: Total Profit at the Profit-Maximizing Level of Output

9.

award:
6.25 out of
6.25 points

Question and Exercise 13-14

Under what cost condition is the shutdown point the same as the point at which a firm exits the market?

Worksheet	Learning Objective: 13-03 Determine the output and profit of a perfect competitor graphically and numerically.	273
Question and Exercise 13-14	Section: Total Profit at the Profit-Maximizing Level of Output

10.

award:
6.25 out of
6.25 points

Question and Exercise 13-15

A profit-maximizing firm is producing where MR = MC and has an average total cost of $4, but it gets a price of $3 for each good it sells.

a. What would you advise the firm to do?

As long as average variable costs are less than $3, in the short run, the firm should produce. In the long run, it should exit the market.

b. What would you advise the firm to do if you knew average variable costs were $3.50?

The firm should shut down in the short run and exit the market in the long run.

Worksheet	Learning Objective: 13-03 Determine the output and profit of a perfect competitor graphically and numerically.	273
Question and Exercise 13-15	Section: Total Profit at the Profit-Maximizing Level of Output

11.

award:
6.25 out of
6.25 points

Question and Exercise 13-15 (algo)

A profit-maximizing firm is producing where MR = MC and has an average total cost of $8, but it gets a price of $6 for each good it sells.

a. What would you advise the firm to do?



b. What would you advise the firm to do if you knew average variable costs were $7?

.

Worksheet	Learning Objective: 13-03 Determine the output and profit of a perfect competitor graphically and numerically.	273
Question and Exercise 13-15 (algo)	Section: Total Profit at the Profit-Maximizing Level of Output

12.

award:
6.25 out of
6.25 points

Question and Exercise 13-16

A farmer is producing where MC = MR. Say that half of the cost of producing wheat is the rental cost of land (a fixed cost) and half is the cost of labor and machines (a variable cost). If the average total cost of producing wheat is $8 and the price of wheat is $6, what would you advise the farmer to do? (“Grow something else” is not allowed.)

Worksheet	Learning Objective: 13-03 Determine the output and profit of a perfect competitor graphically and numerically.	273
Question and Exercise 13-16	Section: Total Profit at the Profit-Maximizing Level of Output

13.

award:
6.25 out of
6.25 points

Question and Exercise 13-16 (algo)

A farmer is producing where MC = MR. Say that half of the cost of producing wheat is the rental cost of land (a fixed cost) and half is the cost of labor and machines (a variable cost). If the average total cost of producing wheat is $28 and the price of wheat is $22, what would you advise the farmer to do? (“Grow something else” is not allowed.)

Worksheet	Learning Objective: 13-03 Determine the output and profit of a perfect competitor graphically and numerically.	273
Question and Exercise 13-16 (algo)	Section: Total Profit at the Profit-Maximizing Level of Output

14.

award:
6.25 out of
6.25 points

Question and Exercise 13-17

Based on the following table:

Output	Price ($)	Total Costs ($)
0	10	31
1	10	40
2	10	45
3	10	48
4	10	55
5	10	65
6	10	80
7	10	100
8	10	140
9	10	220
10	10	340

a. The profit-maximizing output is

b. In the long run, the market price willrise because

Worksheet	Learning Objective: 13-04 Explain the adjustment process from short-run equilibrium to long-run equilibrium.	279
Question and Exercise 13-17	Section: Adjustment from the Short Run to the Long Run

15.

award:
6.25 out of
6.25 points

Question and Exercise 13-17 (algo)

Based on the following table:

Output	Price ($)	Total Costs ($)
0	10	6
1	10	11
2	10	14
3	10	15
4	10	18
5	10	24
6	10	34
7	10	48
8	10	67
9	10	93
10	10	129

a. The profit-maximizing output is units.

b. In the long run, the market price will because .

Worksheet	Learning Objective: 13-04 Explain the adjustment process from short-run equilibrium to long-run equilibrium.	279
Question and Exercise 13-17 (algo)	Section: Adjustment from the Short Run to the Long Run

16.

award:

6.25 points

Question and Exercise 13-21

Use the accompanying graph, which shows the marginal cost and average total cost curves for the shoe store Zapateria, a perfectly competitive firm.

a. If the market price of shoes is $70 a pair, Zapateria will prod pairs.

b. If the market price of shoes is $70 a pair, Zapateria will earn total profit equal to $.

c. Should Zapateria expect more shoe stores to enter this market? Why or why not?


d. Assuming the shoe market is a constant-cost industry, the long-run equilibrium price is .

Graphing	Learning Objective: 13-04 Explain the adjustment process from short-run equilibrium to long-run equilibrium.	279
Question and Exercise 13-21	Section: Adjustment from the Short Run to the Long Run