Question

Draw a diagram depicting the profit maximizing level of output for a firm where the market...

Draw a diagram depicting the profit maximizing level of output for a firm where the market price is below the average total cost of production, but above average variable cost of production. Your diagram of the firm must include the ATC, MC, and AVC curves. Indicate in the diagram the loss that the firm is incurring.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Explanation :

On X - axis quality is given and on Y axis price is given.

Firm maximises it's profit where MR equals MC and in perfect competition price is equals to MR. So Q max is the profit-maximizing quantity.

The shaded area in the graph shows the losses.

When firm is price taker, it charge market price. Price taker firm is perfectly competitive firm.

So above graph is for perfectly competitive firm. Because price is below average total cost firm earns negative economic profit. When price is below average variable cost firm will shutdown. Here price is above average variable cost and below average total cost so firm will produce ti minimise losses.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Draw and label a graph depicting a monopolistic market from perspective of a single firm. Make...
Draw and label a graph depicting a monopolistic market from perspective of a single firm. Make sure you illustrate the profit maximizing price and quantity (10 points total). Start with a graph depicting market equilibrium for the monopolistic market (5 points possible). Modify the graph to demonstrate that the price at the profit maximizing level of output is above the average variable cost curve, but below the average cost curve (10 points possible). Is the firm making a profit or...
14) For a monopoly firm, the profit maximizing output is at that level where ________ and...
14) For a monopoly firm, the profit maximizing output is at that level where ________ and the price of the product is determined from ________. A) AR=MR;AR B) AR = MR; MR C) MC = MR; AR D) MC = MR; MR E) none of the above
We have the following information about a profit-maximizing firm in a perfectly competitive market: Price =...
We have the following information about a profit-maximizing firm in a perfectly competitive market: Price = 95 Quantity = 1000 Average Total Cost (ATC) = 95 Average Variable Cost (AVC) = 83 Which of the following is correct? The firm is making a loss The firm is making an economic profit The firm should shut down The firm should keep operating
Assume that the market for fertilizer is perfectly competitive. Firms in the market are producing output...
Assume that the market for fertilizer is perfectly competitive. Firms in the market are producing output but they are experiencing economic losses. Explain how ATC, AVC and MC are related (Note: the relationship of these cost curves is same whether there is loss or profit). Explain how the price of fertilizer compares to the ATC, AVC and MC of producing fertilizer Draw two graphs side by side illustrating the present situation for the single firm and the entire market. Cleary...
The table below shows output, fixed, variable, and total costs for a firm in a perfectly...
The table below shows output, fixed, variable, and total costs for a firm in a perfectly competitive market. Output Fixed Cost (FC) Variable Cost (VC) Total Cost (TC) Avg. Fixed Cost (AFC) Avg. Variable Cost (AVC) Avg. Total Cost (ATC) Marginal Cost (MC) 0 5 0 1 7 2 10 3 9 4 19 5 25 1. Fill in the blank spaces in the fixed, variable, and total cost columns. Also complete the AFC, AVC, ATC, and MC columns (round...
. The table below illustrates the quantity of output (in units) and total cost (TC, in...
. The table below illustrates the quantity of output (in units) and total cost (TC, in MYR) for a perfectly competitive firm that can sell its output at MYR 9 per unit. Quantity TC TVC ATC AVC MC TR MR Profit /Loss 0 3 0 - - - 0 - -3 1 6 2 12 3 21 4 33 5 49 a. Calculate the total variable cost (TVC), average total cost (ATC), average variable cost (AVC), marginal cost (MC), total...
Which of the following conditions will result in the firm making a positive economic profit? P...
Which of the following conditions will result in the firm making a positive economic profit? P = AVC at the profit-maximizing q* P = ATC at the profit-maximizing q* P  ATC at the profit-maximizing q* P  ATC at the profit-maximizing q* ATC  P  AVC at the profit-maximizing q* An example of a direct negative incentive is: providing generous benefits and pay for employees. providing a commission for sales. providing an orientation for new employees. awarding a promotion for hard work. threatening to fire those...
If a firm is producing at the profit maximizing level of output, it must be making a profit.
If a firm is producing at the profit maximizing level of output, it must be making a profit.
Suppose Lu operates a profit maximizing shop in a perfectly competitive market where all firms are...
Suppose Lu operates a profit maximizing shop in a perfectly competitive market where all firms are identical. Her fixed costs are $14 per month. Her variable costs per month are given in the following table: (For simplicity, assume Lu can only produce in whole units each month) Use the table below to fill in the missing values for total cost, average variable cost (AVC) and average total cost (ATC). Use your table to calculate the marginal cost for each additional...
Nimbus, Inc. makes brooms and then sells them door-to-door. The table below demonstrates the relationship between...
Nimbus, Inc. makes brooms and then sells them door-to-door. The table below demonstrates the relationship between the number of workers and Nimbus’s output in a given day. The firm experiences fixed costs of $200, and its variable cost (workers) is $100 per worker per day. The broom industry is perfectly competitive. Fill in the table below: Number of Workers Brooms (Total Output) Q Marginal Product MP Fixed Cost FC Variable Cost VC Total Cost TC Avg Fixed Cost AFC Avg...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT