Farmer Smith grows apples. The average total cost and marginal cost of growing applesfor an individual farmer are illustrated in the graph to the right.Suppose the market for apples is perfectly competitive. If thebox, then to maximize profits, farmer Smith should produceapples. (Enter a numeric response using an integer.)market price is $32 perthousand boxes ofPrice and cost (dollars per box)40MC36-QAICPriceC32 28 24 20 16 1712-&-4-010 20 30 40 50 60 70 80Quantity of apples (boxes per month in 1000s)90 100

Answer is 70.Explanation:Under perfect competition, profit is maximised where MR=MC. But in perfect…

Answered: Farmer Smith grows apples. The average…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 1SCQ: Firms ill a perfectly competitive market are said to be price takers that is, once the market...

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Would you rather have efficiency or variety? That is, one opportunity cost of the variety of products we have is that each product costs more per unit than if there were only one kind of product of a given type, like shoes. Perhaps a better question is, What is the right amount of variety? Can there be too many varieties of shoes, for example?
Suppose a science museum charges $15 for admission, and each day 200 adults visit the museum. Suppose the museum directors cannot change the price they charge, but they know that for every $1000 a day spent on advertising they can increase demand by 50 tickets. The cost of operating the museum for a day is $2,000. Which of the following advertising choices should they make to maximize profits? O Spend $100O0 a day on advertising O Spend $2000 a day on advertising O Spend no money on advertising O Spend $3000 a day on advertising
a. the increase in profit when output is reduced from 8 to 7 units of output. b. the profit that could be made if output increases from 7 to 8 units of output. c. the deadweight loss associated with the power of the price taking firm. d. the amount of profit when 8 units of output are produced.
100 90 80 70 60 ATC 50 40 30 20 AVC МС О 10 + 0 0 5 10 15 20 30 35 40 45 50 QUANTITY (Thousands of shirts) or each price in the following table, use the graph to determine the number of shirts this firm would produce in order to maximize its profit. Assume hat when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero shirts and the profit-maximizing uantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will nake a profit, suffer a loss, or break even at each price. Price Quantity (Dollars per shirt) (Shirts) Profit or Loss? Produce or Shut Down? Shut down 10 20,000 Loss Shut down 20 10,000 Loss Shut down 32 5,000 Loss Either 0 or 37,500 Shut down 40 Loss 25 COSTS (Dollars)
l alfa 8-19 am 1. Which of the following remains constant as output increases? * O a. TFC O b. TVC O c. TC d. All of the above Ruepue is $45
The market for apple pies in the city of Ectenia iscompetitive and has the following demand schedule:Price Quantity Demanded$1 1,200 pies2 1,1003 1,0004 9005 8006 7007 6008 5009 40010 30011 20012 10013 0Each producer in the market has fixed costs of $9 andthe following marginal cost schedule:Quantity Marginal Cost1 pie $ 22 43 64 85 106 12a. Compute each producer’s total cost andaverage total cost for each quantity from 1 to6 pies.b. The price of a pie is now $11. How many pies aresold? How many pies does each producer make?How many producers are there? How much profitdoes each producer earn?c. Is the situation described in part (b) a long-runequilibrium? Why or why not?d. Suppose that in the long run there is free entryand exit. How much profit does each producerearn in the long-run equilibrium? What isthe market price? How many pies does eachproducer make? How many pies are sold inthe market? How many pie producers areoperating?
3. Answer the following questions about the figure below: eliqu Price $20 $18 $16 $14 $12 $10 $8. $6 $4 $2 0 MR D 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Quantity MC a. What is the profit-maximizing level of output? iliw tailogonom off 010 +115d0-(899 moitiba T wilmM) loods.P b. What price with the monopolist charge to maximize profits?
Quantity of Miami Dade Shades 1st pair 2nd pair 3rd pair 4th pair Marginal Cost (dollars) producer surplus will equal $105. there will be a surplus; as a result, the price will fall to $95. $60 95 140 185 Refer to Table 4-4. The table above lists the marginal cost of sunglasses by Miami Dade Shades, a firm that specializes in producing designer sunglasses. If the market price for a pair of Miami Dade Shades sunglasses is $130, A they will produce three pairs. B producer surplus from the first pair is $35.
The market for apple pies in the city of Ectenia is competitive and has the followingdemand schedule:Price Quantity Demanded$ 1 1,200 pies2 1,1003 1,0004 9005 8006 7007 6008 5009 40010 30011 20012 10013 0 ch producer in the market has fixed costs of $9 and the following marginal cost:Quantity Marginal Cost1 pie $ 22 43 64 85 106 12a. Compute each producer’s total cost and average total cost for 1 to 6 pies.b. The price of a pie is now $11. How many pies are sold? How many pies does eachproducer make? How many producers are there? How much profit does eachproducer earn?c. Is the situation described in part (b) a long-run equilibrium? Why or why not?d. Suppose that in the long run there is free entry and exit. How much profit does eachproducer earn in the long-run equilibrium? What is the market price? How many piesdoes each producer make? How many pies are sold in the market? How many pieproducers are operating?
2. Suppose that the market for wind chimes is a competitive market. The following graph shows the daily cost curves of a particular firm operating in this PRICE (Dollars per wind chime) 40 36 32 28 24 20 16 12 8 4 0 0 MC ATC 2 4 8 10 12 14 16 18 20 QUANTITY (Thousands of wind chimes per day) AVC 6 market: a) In short run, at a market price of $26 per wind chime, how much will firm choose to produce per day? How do you know? loss in si LIGHT OF LOSS IN SUCARAMIH OF HIS STAPAL. graph. c) What is this firm's shutdown price, that is the price below which it is optimal for the firm to shut down in short run? d) In the long run, all firms can enter and exit the market, and all entrants have the same costs as above. As this market makes the transition to its long-run equilibrium, will the price rise or fall? Will the quantity demanded rise or fall? Will the quantity supplied by each firm rise or fall? Explain your answers. e) Graph the long-run supply curve in equilibrium for this market,…
Using the data in the following table, show what happens to the firm's output choice and profit if the fixed cost of production increases from $100 to $120 to $140, where q is quantity and C is total cost. Assume that the price of output is $64. q 0 1 2 3 4 ܗ ܗ ܢ ܝ 7 8 9 10 11 If the fixed cost of production is $100, then output will be MC PREHRANS4EE 50 28 20 14 18 20 22 38 45 55 65 C (FC = $100) 100 150 178 198 212 230 250 272 310 355 410 475 C (FC = $120) 120 170 198 218 232 250 270 292 330 375 430 495 units (enter your response using an integer) C (FC = $140) 140 190 218 238 252 270 290 312 350 395 450 515
Suppose the market for fresh pork is a competitive market. Initially, it is operatingat its long-run competitive equilibrium at a market price of $50.Owing to the spread of COVID-19, many people turn to buying frozen meat oncea week rather than fresh pork every day. As a result, the market price of fresh porkreduces to $30.a. With the aid of a pair of market-and-firm diagrams, illustrate how thiswould affect the equilibrium price and quantity in the fresh pork market andthe output of a typical butcher of fresh pork in the short-run.b. Suppose, for the situation in (a), the average cost of a typical butcher offresh pork is $40, which includes $15 on buying meat from suppliers, $12on paying rent, $8 on paying hourly wages on staff, and $5 on other costs.Explain whether a typical butcher should shut down in the short run.

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