Home Work Set I-6 The Competitive Ideal (Chapter 9) Short Run Profit Maximization In order to earn money for college expenses, you decide to open a pizza joint called PizzaDeals. Total cost information for your single product, large extra-cheese pizzas, is provided in this table. The market for pizza in your town is extremely competitive, and the market price of large extra- cheese pizzas is $7. Complete the table, and answer the following questions. Output TO ATC AFC AVC MC MR $10 XXX XXX XXX XXX XXX 14 17 19 22 26 31 37 44 52 1. What is the amount of total fixed costs? 2. What is the marginal revenue from the fourth pizza? 3. What is AFC if you produce five pizzas? 4. What is AVC if you produce six pizzas? 5. If you make $ pizzas, what does each one cost you to produce on average? 6. What is the marginal cost of producing the seventh pizza? 7. Assuming that you want to maximize profit, how many pizzas should you make? What is the amount of economic profit (or loss) per pizza that you experience if you produce at the profit-maximizing level?As Tren Dee Apparel's chief executive officer, you decide to break into the competitive sweatshirt market. Use the information provided in this figure to answer the following questions concerning Tren Dee's operations. 9. What is the equilibrium market price of ATC sweatshirts? MC 42 AVC 10. What is the profit-maximizing level of output for Tren Dee (in thousands)? 35 - MR 11. At the profit-maximizing level of output, Price and Costs what is Tren Dee's total revenue (in 25 thousands of dollars)? 15 12. What is Tren Dee's total cost (in thousands of dollars) at the profit- maximizing level of output? 13. At the profit-maximizing level of output, 1.5 4.5 6 9 are economic profits positive, negative, or Quantity of Sweatshirts (1000s) zero? 14. You should shutdown Tren Dee's sweatshirt operation if the market price falls below what dollar amount? Firm And Industry Supply Curves Cost information for Ledbetter, a typical firm in the competitive pencil industry, is provided in this table. 15. How many cases of pencils would Output Ledbetter supply if the market price (Cases) ATC AFC AVC MC were $6? 0 XXX XXX XXX XXX 16. What quantity would Ledbetter supply 1 $8.00 $5.00 $3.00 $3.00 2 5.00 2.50 2.50 if the market price were $3? 2.00 3 3.67 1.67 2.00 1.00 17. What quantity would Ledbetter supply 4 3.25 1.25 2.00 2.00 if the market price were $1? 3.20 1.00 2.20 3.00 6 3.33 0.83 2.50 4.00 3.57 0.71 2.86 5.00 3.88 0.63 3.25 6.00 4.22 0.56 3.67 7.00Suppose that there are 100 identical firms in the Quantity Quantity pencil industry (including Ledbetter). Complete the Demanded Supplied table at the right by determining total quantity Price ($ (Cases) Cases) supplied at the various prices. 900 N 850 18. What is total quantity supplied at a market price 3 800 of $7? 750 19. What is the short run equilibrium price in this 700 market? 6 650 7 600 Long Run Adjustments Use this figure, which illustrates short run cost and revenue conditions for a typical firm in the competitive laser printer industry, to answer the following questions. 20. The short run market price is? MC 21. In the long run, what will happen to the number of firms in the industry? - MR (increase, decrease, remain the same) ATC 22. In the long run, what will happen to the AVC Price and Costs market supply curve for laser printers? (shift right, shift left, remain the same) 23. In the long run, what will happen to market price? (increase, decrease, remain the same) 24. In the long run, what will happen to Q1 economic profits (or losses) in this Quantity of Laser Printers industry? (increase, decrease, remain the same) 25. Assuming this is a constant cost industry, the long run equilibrium price will be