5 Econ 101 Questions

1.

The firm needs to make certain decisions in regard to price and output. Different cost curves are used in making these decisions. a) The average variable cost curve is used to decide :I b) The marginal cost curve is used to decide c) The average cost curve is used to determi '/ I the level of profit or loss Check the shutdown price the best output In perfectly competitive markets, there are |:l numbers of wellinformed and sellers. Perfectly competitive firms sell products and can exit or enter the industry. A perfectly competitive firm is a price taker. It has control over price and consequently has to take price as a given, but it can sell - that it wants at the going market price. The demand curve for a perfect competitor is at the going market price. The demand curve is also the revenue curve because revenue is defined as the change in total revenue due to a one-unit change in output. Profit is perfect competitor's maximized at the rate of output at which the positive difference between - revenues and - costs is the greatest. This is the same level of output at which - revenue equals cost. The perfectly competitive firm produces at an output rate at which marginal cost equals the |:l per unit of output, because MR is always equal to P. Consider the graph below. The area of the shaded rectangle displays hourly economic profits. What prevents this firm from continuing to produce the same number of units per hour but raising the price that it charges for each unit in order to enlarge the area of the profit rectangle? Price and Marginal Cost W per unitl , so its product is its customers would substitute away from its product in favor of the products provided by other firms at the $8per-unit market clearing price, and the firm's profits would . The diagram below depicts the daily total cost and total revenue curves for a firm. If the firm chooses the profit maximizing level of output, it will earn a profit of $ per day. Round your answer to 2 decimal places, if necessary. Do not enter the comma ",", or a dollar sign ($) while entering your answer. Revenue and Costs (3) TR 188 Output (per day) Consider the graph below, which applies to a perfectly competitive firm. Price and Costs ES per unit) 2 3 4 5 6 'r' 8 910111213141516 Output (thousands of units per week) This firm currently faces an equilibrium price of $20 per unit and produces 10,000 units of output per week. Do not enter the comma ",", or a dollar sign ($) while entering your answer. What is the firm's current average revenue per unit? What are the present economic profits of this firm