/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q.4 Suppose that the market price in... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 8: Q.4 (page 211)

Suppose that the market price increases to $6, as Table 8.14 shows. What would happen to the profit-maximizing output level?

Short Answer

Expert verified

The profit maximizing output level becomes 90units.

Step by step solution

01

Given information

In a perfect competition, following information is provided

The profit maximization price and quantity are at that point where MC=MR, and MC cuts MR.In other words, MC should be rising when it equates to MR.

02

Explanation

As we know, in order to maximize the profit the firm will produce that level of output where MR=MC. We can see from the table that MR=MC at Q=90, therefore, this firm will produce the 90units of output. Also, profit is the difference between TR and TC, at Q=90, TR=540, and TC=324, so the profit isrole="math" localid="1646821019343" $540-$324=$216. So we can say that the firm is making a positive profit when P=$6.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What prevents a perfectly competitive firm from seeking higher profits by increasing the price that it charges?

In the argument for why perfect competition is allocatively efficient, the price that people are willing to pay represents the gains to society and the marginal cost to the firm represents the costs to society. Can you think of some social costs or issues that are not included in the marginal cost to the firm? Or some social gains that are not included in what people pay for a good?

Explain how the profit-maximizing rule of setting P = MC leads a perfectly competitive market to be allocatively efficient.

1. A computer company produces affordable, easy-to-use home computer systems and has fixed costs of \(250. The marginal cost of producing computers is \)700 for the first computer, \(250 for the second, \)300 for the third, \(350 for the fourth, \)400 for the fifth, \(450 for the sixth, and \)500 for the seventh.

a. Create a table that shows the company鈥檚 output, total cost, marginal cost, average cost, variable cost, and average variable cost.

b. At what price is the zero-profit point? At what price is the shutdown point?

c. If the company sells the computers for \(500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVC curves to illustrate your answer and show the profit or loss.

d. If the firm sells the computers for \)300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVC curves to illustrate your answer and show the profit or loss.

Would independent trucking fit the characteristics of a perfectly competitive industry?
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.