5:17 K MICROECONOMICS -... Q Microeconomics - Chapter 9 Homework Score: 10 Points NAME: DATE: 1. The S.S.K Allen Fabric Company sells cotton fabric in a perfectly competitive market at a price of $4 per yard. Its marginal cost, average variable cost, and average total cost curves can be seen below: MC price ATC d=MR AVC Find the profit-maximizing level of output and mark it as 10,000 yards. Mark the average total cost for producing this level of output as $5.00 and shade in the area of profit earned by the firm. Is it positive or negative? 2. The PPS Company sells lead pencils in a perfectly competitive market for $5 per box of a dozen pencils. The firm currently produces 2,500 boxes of lead pencils each week and average total cost at this level of production is $5.15. What level of profit is this firm earning? Explain. 3. Lentz's Incorporated sells paper in a perfectly competitive market at a price of $2 per ream. At the profit-maximizing (cost-minimizing) level of output, average total cost is $2.50 per ream and average variable cost is $1.95 per ream. Should the firm continue to operate in the short run? 4. Explain Increasing returns to scale, constant returns to scale and decreasing returns to scale. 5. The table below comes from cost data from the long run total cost function. It shows the monthly output and total monthly cost of USB drives for three firms in the industry. Given the information in the table, calculate the average cost for each scale of operation, interpret the nature of the returns to scale in the USB drive industry and the shape of the long-run average cost curve. Illustrate with the long-run cost curve using the data given below. Firm Monthly Output Total Monthly Cost ($) A 150,000 75,000 200,000 120,000 C 225,000 146,500 000 O= 2 O= Dashboard Calendar To Do Notifications Inbox