According to marginal analysis, a perfectly competitive firm will produce an output level where what is true about its Marginal Revenue and its Marginal Cost
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- Will a profit-maximizing firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation.What happens to a competitive firm whose cost function exhibits decreasing marginal cost everywhere? Construct a concrete cost function of this type and carry out the search for the profit-maximizing output.One of the students states that this actually is beneficial to the firm because less output means more profit. Is that student correct? The key to solving the puzzle is the marginal principle.
- In the above figure, if the price is $16 per unit, how many units will a profit maximizing perfectly competitive firm produce?For the pizza seller whose marginal, average variable, and average total cost curves are shown in the graph below, what is the profit-maximizing level of output and how much profit will this producer earn if the price of pizza is $1.50 per slice?Instructions: In the graph below, label all three curves by clicking on the dropdown to select the appropriate label. Instructions: Enter your response as a whole number. If you are entering a negative number, be sure to include a negative sign (−). When the price is $1.50 per slice, the profit-maximizing level of output is slices per day. Instructions: Enter your response rounded to the nearest penny (two decimal places). At the profit-maximizing level of output, the producer's profit is: $ per day.Perfect competition is an extremely rare type of market in the real world. This is because the conditions necessary for perfect competition are difficult to meet. Write about an example of perfect competition (or at least a market that is very close to perfect competition). Do different sellers in the market you’ve described charge different prices for their product? Does your answer support the idea that this market is perfectly competitive? Explain. Does it seem as if the example you mentioned is allocatively efficient? In other words, does the market produce enough of this good (or does it produce too much or too little)? Explain.
- Consider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. For each price in the following table, use the graph to determine the number of shirts this firm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero shirts and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price.Assume that a firm in a competitive market faces the following cost information. If the market price for this firm's product is $40, calculate the profit maximizing level of output for this firm using marginal analysis. It may help to create your own cost table and fill in columns for Marginal Cost and Average Total Cost based on the Total Cost information below. a.What is the level of profit for this firm at the profit maximizing output? b.To convince yourself that the quantity you found is indeed the profit maximizing quantity, try calculating what the profit would be at the next higher level of output. What did you find? c. What do you predict will happen in this market over the long run?In the long-run equilibrium of a competitive market with identical firms, what are the relationships among price (P), marginal cost (MC), and average total cost (ATC)?
- explain why a firm might want to produce its good even after diminishing marginal returns have set in and marginal cost is rising ?Consider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. COSTS (Dollars) 100 90 80 70 60 30 20 10 0 0 ☐ 3 MC 6 15, 20 ATC AVC 0 9 12 15 18 21 QUANTITY (Thousands of shirts) 24 27 1 30 (?)Homework (Ch 14) 6. Deriving the short-run supply curve Consider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 100 90 80 70 60 АТС 50 40 30 20 AVC MC O 10 25 30 35 40 45 50 5 10 15 20 QUANTITY (Thousands of shirts) COSTS (Dollars)
