1 / 23

Economics 2301 Assignment 7

Economics 2301 Assignment 7. Tony Lima. Chapter 9, Q. 2. Chapter 9, Q. 2 answer. The company will produce where P = MC as long as P > minimum AVC. Minimum AVC is 39.17 at Q = 6. At P = 0, 11, 23, 31 the firm will produce no output and profits will be equal to -50 (minus fixed cost).

darice
Download Presentation

Economics 2301 Assignment 7

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Economics 2301Assignment 7 Tony Lima

  2. Chapter 9, Q. 2

  3. Chapter 9, Q. 2 answer • The company will produce where P = MC as long asP > minimum AVC. • Minimum AVC is 39.17 at Q = 6. • At P = 0, 11, 23, 31 the firm will produce no output and profits will be equal to -50 (minus fixed cost).

  4. Chapter 9, Q. 2 answer • At P = 42 the firm will produce 7 units of output because P = 42 > 40 = MC. Profit = -31 • At P = 52 the firm will produce 8 units of output because P = 52 > 50 = MC. Profit = 41 • At P = 63 the firm will produce 9 units of output because P = 63 > 60 = MC. Profit = 132 • At P = 73 the firm will produce 10 units of output because P = 73 > 70 = MC. Profit = 225

  5. Chapter 9, Q. 2 answer

  6. Chapter 9, Q. 3

  7. Chapter 9, Q. 3

  8. Chapter 9, Q. 3 answer • The company will produce where P = MC as long asP > minimum AVC. • Minimum AVC is 38.67 at Q = 6. • At P = 0, 16, 25 the firm will produce no output and profits will be equal to -50 (minus fixed cost).

  9. Chapter 9, Q. 3 answer • At P = 40 the firm will produce 6 units of output because P = 40 > 36 = MC. Profit = -42 • At P = 51 the firm will produce 7 units of output because P = 51 > 48 = MC. Profit = 27 • At P = 62 the firm will produce 8 units of output because P = 62 > 60 = MC. Profit = 106 • At P = 75 the firm will produce 9 units of output because P = 75 > 72 = MC. Profit = 213 • At P = 86 the firm will produce 10 units of output because P = 86 > 84 = MC. Profit = 314

  10. Chapter 9, Q. 3 answer

  11. Chapter 9 Q. 3 answer

  12. Chapter 9, Q. 8 answer • I apologize for assigning this question. • If you had trouble with it, don’t worry about it. • If you spent a lot of time on it, I apologize again.

  13. Chapter 9 Q. 13

  14. Chapter 9 Q. 13 answer • A. TR = $1,500 TC = $1,500 TFC = $500 • TR = $1,500 > $1,000 = TVC. • TVC = TC – FC = $1,500 - $500 = $1,000. • This means the firm should keep operating. • TR = TC so the firm’s economic profit is zero. The firm is earning a normal rate of return on investment, so it will continue operating as it is currently unless some factor changes.

  15. Chapter 9 Q. 13 answer • B. TR = $2,000 TC = $1,500 TFC = $500 • TR = $2,000 > $1,000 = TVC. • TVC = TC – FC = $1,500 - $500 = $1,000. • This means the firm should keep operating. • TR > TC so the firm’s economic profit is positive ($500). The firm is earning positive economic profit, so it will expand the scale of its operations.

  16. Chapter 9 Q. 13 answer • C. TR = $2,000 TC = $2,500 TFC = $200 • TR = $2,000 < $2,300 = TVC. • TVC = TC – FC = $2,500 - $200 = $2,300. • This means the firm should temporarily shut down. • TR < TC so the firm’s economic profit is negative (-$500). The firm is earning negative economic profit, so it will contract the scale of its operations and may exit the business in the long run.

  17. Chapter 9 Q. 13 answer • D. TR = $5,000 TC = $6,000 TFC = $1,500 • TR = $5,000 > $4,500 = TVC. • TVC = TC – FC = $6,000 - $1,500 = $4,500. • This means the firm should keep operating in the short run. • TR < TC so the firm’s economic profit is negative (-$1,000). The firm is earning negative economic profit, so it will contract the scale of its operations and may exit the business in the long run.

  18. Chapter 9 Q. 13 answer • E. TR = $5,000 TC = $7,000 TFC = $1,500 • TR = $5,000 < $5,500 = TVC. • TVC = TC – FC = $7,000 - $1,500 = $5,500. • This means the firm should shut down in the short run. • TR < TC so the firm’s economic profit is negative (-$2,000). The firm is earning negative economic profit, so it will contract the scale of its operations and may exit the business in the long run.

  19. Chapter 9 Q. 13 answer • F. TR = $5,000 TC = $4,000 TFC = $1,500 • TR = $5,000 > $2,500 = TVC. • TVC = TC – FC = $4,000 - $1,500 = $2,500. • This means the firm should keep operating in the short run. • TR > TC so the firm’s economic profit is positive($1,000). The firm is earning positive economic profit, so it will expand the scale of its operations.

  20. Chapter 9 Q. 14

  21. Chapter 9 Q. 14 answer • At Q = 5, P = $18 > $17 = MC. • TR = $90 TC = $95 Profit = -$5 • TR = $90 > $73 = TVC. • This means the firm should keep operating in the short run. • TR < TC so the firm’s economic profit is negative(-$5). The firm is earning negative economic profit, so it will contract the scale of its operations and possibly exit the industry.

  22. Ch. 9 Q. 17

  23. Ch. 9 Q. 17 answer • The trick is to realize that demand will increase first. That will raise the market price in the short run, creating positive economic profits. • But, since the industry is constant cost, the long-run price must remain at $6. Therefore, the supply curve will shift out just enough to return the price to $6.

More Related