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ECON 102 Study Guide - Final Guide: Average Variable Cost, Fixed Cost, Marginal Cost

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turquoisegnu128
1 Oct 2018
School
University of Illinois
Department
Economics
Course
ECON 102
Professor
All

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ECON 102 Full Course Notes
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ECON 102 Full Course Notes
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Document Summary

Exam 2: a competitive firm operating in the short run is maximizing profits and just breaking even. Its costs include a monthly license fee of that is imposed by the state and must be paid for as long as the firm is in existence. If the license fee is lowered to , what should the firm do to maximize profits in the short run? not change output. Arlene makes earrings in the shape of the mascot of a local university. Assume that frank, a farmer in a competitive market, is maximizing profits selling. A perfectly competitive orchard that produces 500 lbs of apples in the short run has an atc = and afc = . The market price is per lb and is equal to mc. In order to maximize profits (or minimize losses) in the short-run, this farm should: continue to produce the 500 lbs of apples.

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Related Questions

Suppose that the marginal cost of producing output, q, in the short-run for a competitive firm is MC = 10 + 8q. The market price of the firm's product is $25.

a. (2 pts) What level of output will the firm produce to maximize its profits?

b. (3 pts) Assume that the firm's fixed costs are $5, and the firm's average variable cost is given by AVC = 10 + 4q. What are the short-run total costs at the level of output the firm produces?

c. (3 pts) What are the profits in the short-run? d. (10 pts) Show the level of profits in a graph.

1) When there is a competitive firm it will maximize profits at which output:

1. Total revenue and total cost are equal.
2 Total revenue exceeds total cost by the greatest amount.
3. Price exceeds average total cost by the largest amount.
4. The difference between marginal revenue and price is at a maximum.

2) Assume that QRS Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:

1. Should close down in the short run.
2. Is maximizing its profits.
3. Is realizing a loss of $60.
4. Is realizing an economic profit of $40.

3) In a purely competitive industry:

1. There will be no economic profits in either the short run or the long run.
2. Economic profits may persist in the long run if consumer demand is strong and stable.
3. There may be economic profits in the short run, but not in the long run.
4. There may be economic profits in the long run, but not in the short run.

4) Assume a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. The firm will:

1. Minimizes losses by producing at the minimum point of its AFC curve.
2. Maximizes profits by producing where MR = ATC.
3. Should close down immediately.
4. Should continue producing in the short run.

5) A constant-cost industry is one in which:

1. If 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.
2. If 100 units can be produced for $100, then 150 can be produced for $300, 200 for $600, and so forth.
3. The demand curve and therefore the unit price and quantity sold seldom change.
4. The total cost of producing 200 or 300 units is no greater than the cost of producing 100 units.

Econ 528 Spring 2016 Final Exam: Monopoly Due: April 26, 2016, 6 PM 1. Hank Yoon is the economist in a competitive market. The market price is $35 per item. The total cost equation is , and MC = 2 + Q

1.a. What level of output of items should you produce in the short run?

b. What price should you charge in the short run?

c. Will you make any profits (Total Revenue minus Total Costs) in the short run?

d. What will happen in the long run? How would your answers change if your costs were and MC = 5 + 60Q

 

2. Phillip Haynes is the controller of a company that has the sole authority to manufacture your product. The inverse market demand curve is . Your total cost equation is . What is the output you should produce, the price you should charge, and your profits.

3. You are the project executive of a monopolistically competitive firm. The present demand curve is . Your total cost equation is , and MC = 17Q

a. What level of output should you set to maximize profits?

b. What price would you charge?

c. What will happen in your market in the long run? Explain.