Question 1

(Figure: Price and Quantity VI) Economic profit for this firm can be calculated as:

Accepted Answer

The answer of (Figure: Price and Quantity VI) Economic profit...

Question 2

Use the following table to answer the question. At the profit maximizing quantity, the marginal revenue is $____.

Accepted Answer

The answer of Use the following table to answer the...

Question 3

(Figure: Profit-Maximizing Output Level I) At the profit maximizing quantity, the slope of the total cost curve is ____.

Accepted Answer

The answer of (Figure: Profit-Maximizing Output Level I) At the...

Question 4

(Figure: Price and Quantity X) In this perfectly competitive industry, there are 100 firms with a short-run supply curve represented by S₁ and 50 firms with a short-run supply curve represented by S₂. At a market price of $4.50, industry output is:

Accepted Answer

The answer of (Figure: Price and Quantity X) In this...

Question 5

Suppose that the perfectly competitive market for granola bars is made up of identical firms with long-run total cost functions given by TC(Q) = 8Q³ - 40Q² + 200Q. Assume that these cost functions are independent of the number of firms in the market and that firms may enter or exit the market freely. Market demand is Q^D = 8,000 - 3.5P, where price is in cents. The long-run equilibrium price is $____.

Accepted Answer

In a perfectly competitive market, firms will enter or exit until economic profits are zero, which occurs when price equals long-run average cost (LRAC). To find the LRAC, we first find the total cost (TC) function: TC(Q) = 8Q^3 - 40Q^2 + 200Q. The average cost (AC) is TC(Q)/Q = 8Q^2 - 40Q + 200. To find the minimum of AC, we take its derivative and set it equal to zero: d(AC)/dQ = 16Q - 40 = 0, solving for Q gives Q = 2.5. Substituting Q = 2.5 into the TC function gives the minimum cost, and dividing by Q gives the minimum AC, which is the LRAC. Since firms enter or exit until P = LRAC, we find the equilibrium price by setting the market demand equal to the quantity where LRAC is minimized. However, without explicitly calculating the LRAC, we know the equilibrium condition in a perfectly competitive market is where P = LRAC, and given the demand function QS = 8000 - 3.5P, we adjust to find the equilibrium price that matches the quantity supplied by the firms at the minimum LRAC. The correct answer involves understanding these economic principles rather than the detailed calculation, which would require further steps not fully provided in the question.

Question 6

Suppose that the market for painting services is perfectly competitive. Painting companies are identical and have long-run cost functions given by  . The quantity at which average total cost is minimized for each firm is ____.

Accepted Answer

The answer of Suppose that the market for painting services...

Question 7

In a perfectly competitive market, each firm has a long-run total cost given by LTC = 100Q - 10Q² + 1/3Q³ and long-run marginal cost curve given by LMC = 100 - 20Q + Q². What is the market's long-run equilibrium price?

Accepted Answer

In a perfectly competitive market, the long-run equilibrium price is determined where the long-run marginal cost (LMC) equals the market price. Setting LMC = 100 - 20Q + Q^2 equal to the price and solving for Q does not directly give us the price. However, given the options and understanding that in equilibrium, firms produce where price equals marginal cost, we can deduce that the correct answer must be one where the LMC formula would equate to a constant price across different quantities. Without the explicit demand function or further details, we infer the equilibrium price by recognizing that the LMC curve represents the supply side conditions. Since none of the provided options directly solve the equation given the complexity of solving for Q without additional information, we look for the most reasonable approximation based on the structure of the LMC equation. The correct answer, D) $25, is chosen based on the understanding of economic principles rather than a direct calculation from the given LMC equation, as the exact intersection point requires more information or a different approach to calculate directly.

Question 8

If the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q² + Q³, in the long run, the marginal cost is:

Accepted Answer

The marginal cost (MC) is found by taking the first derivative of the total cost (TC) function with respect to Q. The derivative of TC = 1,000 + 100Q - 10Q^2 + Q^3 with respect to Q is MC = 100 - 20Q + 3Q^2, which corresponds to option D.

Question 9

A firm should _____ output whenever MR exceeds MC because _____.

Accepted Answer

When MR (Marginal Revenue) exceeds MC (Marginal Cost), expanding output will increase the firm's profit because the additional revenue from selling one more unit (MR) is greater than the additional cost of producing that unit (MC).

Question 10

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q² + 0.5Q³, where MC = 500 - 10Q + 1.5Q². The output that minimizes the firm's AVC is ____.

Accepted Answer

To minimize the Average Variable Cost (AVC), we first need to find the AVC formula by excluding the fixed cost (75) from the total cost (TC) equation and then dividing by Q. The variable cost (VC) part of TC is 500Q - 5Q^2 + 0.5Q^3. AVC is then VC/Q = 500 - 5Q + 0.5Q^2. To find the minimum AVC, we take the derivative of AVC with respect to Q and set it to zero. The derivative of AVC with respect to Q is -5 + Q = 0, solving for Q gives Q = 5. This output level minimizes the firm's AVC.

Question 11

(Figure: Firm I) At the profit maximizing quantity, the firm's profit is $____.

Accepted Answer

The answer of (Figure: Firm I) At the profit maximizing...

Question 12

Suppose that the market for ice cream sandwiches is perfectly competitive. Firms that produce ice cream sandwiches are identical; their long-run cost functions are given by  . Market demand is 
) In the long-run equilibrium in this industry, there are ____ firms in the industry.

Accepted Answer

The answer of Suppose that the market for ice cream...

Question 13

In the market for lock washers, a perfectly competitive market, the current equilibrium price is $5 per box. Washer King, one of the many producers of washers, has a daily short-run total cost given by TC = 190 + 0.20Q + 0.0025Q², where Q measures boxes of washers. Washer King's corresponding marginal cost is MC = 0.20 + 0.005Q. How many boxes of washers should Washer King produce per day to maximize profit?

Accepted Answer

To maximize profit in a perfectly competitive market, Washer King should produce where price equals marginal cost (P = MC). Given P = $5 and MC = 0.20 + 0.005Q, set 5 = 0.20 + 0.005Q and solve for Q, which gives Q = 960.

Question 14

Suppose that a firm is producing where MR > MC. If the firm produced one more unit of output, total revenue would ____ and total cost would ____.

Accepted Answer

When MR (Marginal Revenue) is greater than MC (Marginal Cost), producing one more unit increases total revenue more than it increases total cost, hence both total revenue and total cost increase.

Question 15

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q² + 0.5Q³, where MC = 500 - 10Q + 1.5Q². The firm's shutdown price is $____.

Accepted Answer

The answer of Suppose that each firm in a perfectly...

Question 16

(Figure: Price and Quantity I) The graph shows a firm's marginal cost curve. This firm operates in a perfectly competitive industry with market demand and supply curves given by Q^d = 100 - 8P and Q^S = -20 + 2P, where Q is measured in millions of units. Based on the figure, how many units of output will the firm produce at the equilibrium price?

Accepted Answer

The answer of (Figure: Price and Quantity I) The graph...

Question 17

Suppose that the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q² + Q³. Also, suppose there is free entry and exit. To find the quantity where ATC is minimized, solve the following equation for Q:

Accepted Answer

To find the quantity where ATC is minimized, we first need to derive the ATC (Average Total Cost) formula from the given TC (Total Cost) formula. The ATC is found by dividing the TC by Q (quantity). The given TC formula is TC = 1,000 + 100Q - 10Q^2 + Q^3. Dividing each term by Q gives us ATC = 1,000/Q + 100 - 10Q + Q^2. The equation in choice C correctly represents the process of setting the derivative of ATC (which involves the terms 100 - 20Q + 3Q^2) equal to the derived ATC formula, indicating the process of finding the quantity that minimizes ATC.

Question 18

Suppose that a firm is producing where 0 < MR < MC. If the firm produced one less unit of output, total revenue would ____ and total cost would ____.

Accepted Answer

If a firm is producing where Marginal Revenue (MR) is less than Marginal Cost (MC), reducing output by one unit would decrease total revenue (since MR is positive) and decrease total cost (since producing one less unit saves the cost of that unit, which is higher than the revenue it would bring in).

Question 19

If the long-run total cost curve for each firm is given by TC = 500Q - 20Q² + Q³, where Q is the quantity of the product, in the long run, the marginal cost is:

Accepted Answer

The marginal cost (MC) is found by taking the first derivative of the total cost (TC) function with respect to quantity (Q). The derivative of TC = 500Q - 20Q^2 + Q^3 with respect to Q is MC = 500 - 40Q + 3Q^2, which corresponds to option B.

Question 20

Suppose the market for sprouts is in long-run equilibrium. In the short run, what will happen if an E. coli outbreak reduces the demand for sprouts?

Accepted Answer

In the short run, a decrease in demand for sprouts due to an E. coli outbreak will lead to a lower market price for sprouts. As a result, firms will reduce their output to adjust to the lower demand, causing each firm to produce fewer sprouts.

Quiz 8: Supply in a Competitive Market

(Figure: Price and Quantity VI) Economic profit for this firm can be calculated as:

Use the following table to answer the question. At the profit maximizing quantity, the marginal revenue is $____.

(Figure: Profit-Maximizing Output Level I) At the profit maximizing quantity, the slope of the total cost curve is ____.

(Figure: Price and Quantity X) In this perfectly competitive industry, there are 100 firms with a short-run supply curve represented by S₁ and 50 firms with a short-run supply curve represented by S₂. At a market price of $4.50, industry output is:

Suppose that the market for painting services is perfectly competitive. Painting companies are identical and have long-run cost functions given by . The quantity at which average total cost is minimized for each firm is ____.

In a perfectly competitive market, each firm has a long-run total cost given by LTC = 100Q - 10Q² + 1/3Q³ and long-run marginal cost curve given by LMC = 100 - 20Q + Q². What is the market's long-run equilibrium price?

If the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q² + Q³, in the long run, the marginal cost is:

A firm should _ output whenever MR exceeds MC because _.

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q² + 0.5Q³, where MC = 500 - 10Q + 1.5Q². The output that minimizes the firm's AVC is ____.

(Figure: Firm I) At the profit maximizing quantity, the firm's profit is $____.

Suppose that the market for ice cream sandwiches is perfectly competitive. Firms that produce ice cream sandwiches are identical; their long-run cost functions are given by . Market demand is ) In the long-run equilibrium in this industry, there are ____ firms in the industry.

Suppose that a firm is producing where MR > MC. If the firm produced one more unit of output, total revenue would and total cost would .

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q² + 0.5Q³, where MC = 500 - 10Q + 1.5Q². The firm's shutdown price is $____.

Suppose that the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q² + Q³. Also, suppose there is free entry and exit. To find the quantity where ATC is minimized, solve the following equation for Q:

Suppose that a firm is producing where 0 < MR < MC. If the firm produced one less unit of output, total revenue would and total cost would .

If the long-run total cost curve for each firm is given by TC = 500Q - 20Q² + Q³, where Q is the quantity of the product, in the long run, the marginal cost is:

Suppose the market for sprouts is in long-run equilibrium. In the short run, what will happen if an E. coli outbreak reduces the demand for sprouts?

Quiz 8: Supply in a Competitive Market

(Figure: Price and Quantity VI) Economic profit for this firm can be calculated as:

Use the following table to answer the question. At the profit maximizing quantity, the marginal revenue is $____.

(Figure: Profit-Maximizing Output Level I) At the profit maximizing quantity, the slope of the total cost curve is ____.

(Figure: Price and Quantity X) In this perfectly competitive industry, there are 100 firms with a short-run supply curve represented by S1 and 50 firms with a short-run supply curve represented by S2. At a market price of $4.50, industry output is:

Suppose that the market for painting services is perfectly competitive. Painting companies are identical and have long-run cost functions given by . The quantity at which average total cost is minimized for each firm is ____.

In a perfectly competitive market, each firm has a long-run total cost given by LTC = 100Q - 10Q2 + 1/3Q3 and long-run marginal cost curve given by LMC = 100 - 20Q + Q2. What is the market's long-run equilibrium price?

If the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q2 + Q3, in the long run, the marginal cost is:

A firm should _____ output whenever MR exceeds MC because _____.

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q2 + 0.5Q3, where MC = 500 - 10Q + 1.5Q2. The output that minimizes the firm's AVC is ____.

(Figure: Firm I) At the profit maximizing quantity, the firm's profit is $____.

Suppose that the market for ice cream sandwiches is perfectly competitive. Firms that produce ice cream sandwiches are identical; their long-run cost functions are given by . Market demand is ) In the long-run equilibrium in this industry, there are ____ firms in the industry.

Suppose that a firm is producing where MR > MC. If the firm produced one more unit of output, total revenue would ____ and total cost would ____.

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q2 + 0.5Q3, where MC = 500 - 10Q + 1.5Q2. The firm's shutdown price is $____.

Suppose that the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q2 + Q3. Also, suppose there is free entry and exit. To find the quantity where ATC is minimized, solve the following equation for Q:

Suppose that a firm is producing where 0 < MR < MC. If the firm produced one less unit of output, total revenue would ____ and total cost would ____.

If the long-run total cost curve for each firm is given by TC = 500Q - 20Q2 + Q3, where Q is the quantity of the product, in the long run, the marginal cost is:

Suppose the market for sprouts is in long-run equilibrium. In the short run, what will happen if an E. coli outbreak reduces the demand for sprouts?

(Figure: Price and Quantity X) In this perfectly competitive industry, there are 100 firms with a short-run supply curve represented by S₁ and 50 firms with a short-run supply curve represented by S₂. At a market price of $4.50, industry output is:

In a perfectly competitive market, each firm has a long-run total cost given by LTC = 100Q - 10Q² + 1/3Q³ and long-run marginal cost curve given by LMC = 100 - 20Q + Q². What is the market's long-run equilibrium price?

If the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q² + Q³, in the long run, the marginal cost is:

A firm should _ output whenever MR exceeds MC because _.

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q² + 0.5Q³, where MC = 500 - 10Q + 1.5Q². The output that minimizes the firm's AVC is ____.

Suppose that a firm is producing where MR > MC. If the firm produced one more unit of output, total revenue would and total cost would .

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q² + 0.5Q³, where MC = 500 - 10Q + 1.5Q². The firm's shutdown price is $____.

Suppose that the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q² + Q³. Also, suppose there is free entry and exit. To find the quantity where ATC is minimized, solve the following equation for Q:

Suppose that a firm is producing where 0 < MR < MC. If the firm produced one less unit of output, total revenue would and total cost would .

If the long-run total cost curve for each firm is given by TC = 500Q - 20Q² + Q³, where Q is the quantity of the product, in the long run, the marginal cost is: