A firm that is losing money should continue to operate in the short run if the ______ exceeds_______. A firm making zero economic profit stays in the market because total revenue is high enough to cover all firm’s costs, including the_________of the entrepreneur.
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A firm that is losing money should continue to operate in the short run if the ______ exceeds_______. A firm making zero economic profit stays in the market because total revenue is high enough to cover all firm’s costs, including the_________of the entrepreneur.
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- Help me answer this review question. Fill in the Blanks. Your firm has a price of $5, an average cost of $7, and an average variable cost of $4. In the short run, you should _____________. The competitive market’s demand curve is ___________ sloping while that of the competitive firm is ____________.If a firm is producing at a quantity in which the marginal cost exceeds marginal revenue, the firm _____.(1) Use the graph to answer the question below. The quantity is measured in thousands of units. What will this firm decide to do in the long run? A-It will stay in the market because the price is above its AVC at its profit-maximizing output. B-It will leave the market because the price is below its ATC at its profit-maximizing output. C-It will increase its price to point B to earn normal profit. D-It will increase its output until its profit-maximizing output level is equal to B. E-Insufficient data to determine. (2) A dairy farmer is operating in a perfectly competitive market. The market price for milk is between the farmer's average variable cost and average total cost at the profit-maximizing level of output. What will the farmer do? A-Produce more milk. B-Produce less milk. C-Shut down in the short run. D-Operate in the short run and leave the industry in the long run. E-Insufficient information to determine (3) A firm operating in a perfectly competitive market cannot…
- Fill in with the correct answer. Your firm has a price of $5, an average total cost of $7, and an average variable cost of $4. Inthe short run, you should__________ (operate/shut down) because ________exceeds___________. Inthe long run, you should ___________(stay in/exit) the market because________ exceeds___________.I. A company produces at an output level where marginal cost is equal to marginal revenue and has the following revenue and cost levels: Total revenue = $1,450 Total cost = $1,500 Total variable cost = $1,300 What would you suggest? a. Shut down. b. Continue to produce because the loss is less than the total fixed cost. c. Increase production to lower the marginal cost. e. Raise the price. II. At current long-run production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. If the market is perfectly competitive, the firm should a. cut back on production. b. stop production all together. c. produce more. d. continue producing at current levels.A perfectly competitive firm would produce______________________________________if it wanted to maximize its profit: Answers: A. the output where MC equals price, the marginal revenue B. the output where the ATC curve is at a minimum C. as much output as it is able to produce D. the output where the marginal cost curve is at a minimum
- Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm? Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?MULTIPLE CHOICE (identify the one best answer below and explain your reasoning for each option): Read the question carefully! If a profit-maximising, perfectly competitive firm is producing a quantity at which price is higher than average total cost but lower than average variable cost, then a.keep producing both in the short run and in the long run b.keep producing in the short run but exit the market in the long run c.shut down in the short run but return to production in the long run d.shut down in the short run and exit the market in the long run e.Such situation cannot occur.It can be argued that ‘a sustained increase in the prices of a product and profitability of businesses producing that product, in an industry where entry of new firms is possible, causes that industry to expand and eventually brings an end to high prices and above average returns’. Explain this phenomenon.
- Case D: Apex Company. Apex is a perfectly competitive firm. It has total fixed costs of $300/day and a daily variable cost schedule in the table below. Apex’s product sells for $200 per unit. Quantity (units) 0 1 2 3 4 5 6 7 8 9 10 Total Variable Cost (TVC) 0 100 180 220 300 390 500 640 800 1000 1250 Answer the following questions: What is the profit-maximizing level of output? Calculate Apex’s profit. If the market price dropped to $80, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case? If the market price dropped further to $40, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case? Comment on your answers to parts (2) and (3).Your business, which has some market power, has the following demand (D), marginal revenue (MR), marginal cost (MC), and average cost (AC) curves. Move point E to label the profit-maximizing price and quantity for your firm. If the goal of your business is to maximize profit, how much will it produce, and what price will it charge? -The business will exit the market because it is unable to cover its average costs. -The business will produce 40 units, and charge a price of $5. -The business will produce 30 units, and charge a price of $3. -The business will produce 30 units, and charge a price of $6.a.What is the profit maximizing level of output for the firm? b.What is the economic profit earned or loss incurred by the firm? c. Based on your answers of (a) & (b) determine what should be the firms decision regarding exit in the long run. Explain your answer.