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30 Apr FIU ECO2023 Assignment HW07 Chapter 13 spring 14

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Question
	
1.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-2



List three conditions
for perfect competition.



Instructions:You may select more
than one answer. Click the box with a check mark for correct answers and click
to empty the box for the wrong answers.




 

 
 
 
Firms’
 products are differentiated.

 		


 

 
 
 
There
 are no barriers to entry.

 		


 

 
 
 
There
 are high barriers to entry.

 		


 

 
 
 
Both
 buyers and sellers are price takers.

 		


 

 
 
 
There
 is only one firm that makes up the entire market.

 		


 

 
 
 
Firms’
 products are identical.

 		


 

 
 
 
Firms
 engage in strategic decision making.

 		
























2.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-5



A perfectly competitive firm sells its good for $20. If marginal cost is
four times the quantity produced, how much does the firm produce? Why?



 

 




 

 
 
Worksheet

 		
 
 
Learning Objective: 13-02 Explain why producing an output at which
 marginal cost equals price maximizes total profit for a perfect competitor.

 		
 
 
268

 		


 

 
 
Question and Exercise 13-5

 		
 
 
Section: The Profit-Maximizing Level of Output

 		
 
 
 

 		








 



 3.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-5 (algo)



A perfectly competitive firm sells its good for $33. If marginal cost is
eleven times the quantity produced, how much does the firm produce? Why?



 

 




 

 
 
Worksheet

 		
 
 
Learning Objective: 13-02 Explain why producing an output at which
 marginal cost equals price maximizes total profit for a perfect competitor.

 		
 
 
268

 		


 

 
 
Question and Exercise 13-5 (algo)

 		
 
 
Section: The Profit-Maximizing Level of Output

 		
 
 
 

 		








 












4.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-6



The following graphs
(A?C) show the marginal cost, marginal revenue, and average total cost curves
for a typical perfectly competitive firm.



a. Identify the profit-maximizing level of output for each firm in graphs
A?C.



Instructions: Use the tool 'Q'
to label the profit-maximizing level of output for each firm.




 

 
 
 






b. Which of the above graphs represents a typical perfectly competitive
firm earning economic profits?



 /



c. Which of the above graphs represents a typical perfectly competitive firm
earning economic losses?



 



d. Which of the above graphs represents a typical perfectly competitive firm
earning zero economic profit?



 .



e. Which of the above graphs represents a typical perfectly competitive firm in
the long run?



.





 

Explanation:



The profit-maximizing level of a competitive firm is where marginal
revenue equals marginal cost. To find the profit-maximizing level of output for
a perfect competitor, find that level of output where MC = MR.
Profit is price less average total cost times output at the profit-maximizing
level of output. Perfectly competitive firms make zero profit in the long run.





 



5.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-9



The following graph
shows marginal cost, average total cost, and average variable cost curves
for a typical perfectly competitive firm.



a. Draw the marginal revenue curve to indicate this firm is in a long-run
equilibrium. Then label the profit-maximizing level of output.



Instructions: Use the tool
'MR' to draw the marginal revenue curve between Q = 0 and Q =
10. Then use the tool 'Q' to indicate the profit-maximizing level of output.




 

 
 
 

 		
 






b. In long-run equilibrium, this firm is earning economic profit
equal to$.





 




 

 
 
Graphing

 		
 
 
Learning Objective: 13-03 Determine the output and profit of a perfect
 competitor graphically and numerically.

 		
 
 
273

 		


 

 
 
Question and Exercise 13-9

 		
 
 
Section: Total Profit at the Profit-Maximizing Level of Output

 		
 
 
 

 		








 



6.



award:

5.73 out of

6.25 points



 



 



 



Question and Exercise 13-10



Each of 10 firms in a
given perfectly competitive industry has the identical costs given in the
first table. The market demand schedule is given in the second table.




 

 
 
Firm

 Quantity

 		
 
 
Firm

 Total Cost ($)

 		
 
 
Firm

 Marginal Cost ($)

 		


 

 
 
0

 		
 
 
12

 		
 
 
--

 		


 

 
 
1

 		
 
 
24

 		
 
 

 		


 

 
 
2

 		
 
 
27

 		
 



 

 
 
3

 		
 
 
31

 		
 



 

 
 
4

 		
 
 
39

 		
 
 


 		


 

 
 
5

 		
 
 
53

 		
 
 


 		


 

 
 
6

 		
 
 
73

 		
 
 


 		


 

 
 
7

 		
 
 
99

 		
 
 


 		










 

 
 
Price

 ($)

 		
 
 
Market Quantity

 Demanded

 		


 

 
 
16

 		
 
 
 40

 		


 

 
 
14

 		
 
 
 50

 		


 

 
 
12

 		
 
 
 60

 		


 

 
 
10

 		
 
 
 70

 		


 

 
 
 8

 		
 
 
 80

 		


 

 
 
 6

 		
 
 
 90

 		


 

 
 
 4

 		
 
 
100

 		


 

 
 
 2

 		
 
 
110

 		








Instructions: Round all
answers to 2 decimal places. 



a. The market equilibrium price and the price each firm gets for its product is
$.



b. Equilibrium market quantity is units, and each firm will
produce units.



c. Each firm will make a profit of $.



d. Firms begin to exit the market when price falls below.





 




 

 
 
Worksheet

 		
 
 
Learning Objective: 13-03 Determine the output and profit of a perfect
 competitor graphically and numerically.

 		
 
 
273

 		


 

 
 
Question and Exercise 13-10

 		
 
 
Section: Total Profit at the Profit-Maximizing Level of Output

 		
 
 
 

 		








 






 

 
 
  
 

 		
 
 
 

 		
 
 
 

 		
 
 

 		








 7.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-12



How is a firm’s marginal cost curve
related to the market supply curve?



 

 




 

 
 
Worksheet

 		
 
 
Learning Objective: 13-03 Determine the output and profit of a perfect
 competitor graphically and numerically.

 		
 
 
273

 		


 

 
 
Question and Exercise 13-12

 		
 
 
Section: Total Profit at the Profit-Maximizing Level of Output

 		
 
 
 

 		








 



8.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-13



The following graph
shows marginal cost, average total cost, and average variable cost curves
for a typical perfectly competitive firm.



a. Draw the marginal revenue curve when market price is $5.50 and then
label the profit-maximizing level of output. Now label the price at which
the firm is earning zero economic profit. Finally, label the price at
which the firm would shut down temporarily.



Instructions: Use the tool
'MR' to draw the marginal revenue curve between Q = 0 and Q =
10 and then use the tool 'Q' to indicate the profit-maximizing level of output.
Now use the tool 'Zero' to indicate the price at which the firm is
earning zero economic profit. Finally, use the tool 'SD' to indicate
the price at which the firm would shut down temporarily.




 

 
 
 

 		
 






b. In the long run, the firm will exit the market if price falls below.





 




 

 
 
Graphing

 		
 
 
Learning Objective: 13-03 Determine the output and profit of a perfect
 competitor graphically and numerically.

 		
 
 
273

 		


 

 
 
Question and Exercise 13-13

 		
 
 
Section: Total Profit at the Profit-Maximizing Level of Output

 		
 
 
 

 		








 



9.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-14



Under what cost condition is the shutdown point the same as the point at
which a firm exits the market?










 

 
 
Worksheet

 		
 
 
Learning Objective: 13-03 Determine the output and profit of a perfect
 competitor graphically and numerically.

 		
 
 
273

 		


 

 
 
Question and Exercise 13-14

 		
 
 
Section: Total Profit at the Profit-Maximizing Level of Output

 		
 
 
 

 		








 



10.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-15



A profit-maximizing firm is producing where MR = MC and
has an average total cost of $4, but it gets a price of $3 for each good it
sells.



a. What would you advise the firm to do?



As long as average variable costs are less than $3, in the short run,
the firm should produce. In the long run, it should exit the market.



b. What would you advise the firm to do if you knew average variable costs were
$3.50?



The firm should shut down in the short run and exit the market in the
long run. 

 




 

 
 
Worksheet

 		
 
 
Learning Objective: 13-03 Determine the output and profit of a perfect
 competitor graphically and numerically.

 		
 
 
273

 		


 

 
 
Question and Exercise 13-15

 		
 
 
Section: Total Profit at the Profit-Maximizing Level of Output

 		
 
 
 

 		








 



11.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-15 (algo)



A profit-maximizing firm is producing where MR = MC and
has an average total cost of $8, but it gets a price of $6 for each good it
sells.



a. What would you advise the firm to do?







b. What would you advise the firm to do if you knew average variable costs were
$7?



. 

 




 

 
 
Worksheet

 		
 
 
Learning Objective: 13-03 Determine the output and profit of a perfect
 competitor graphically and numerically.

 		
 
 
273

 		


 

 
 
Question and Exercise 13-15 (algo)

 		
 
 
Section: Total Profit at the Profit-Maximizing Level of Output

 		
 
 
 

 		








 



12.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-16



A farmer is producing where MC = MR. Say
that half of the cost of producing wheat is the rental cost of land (a fixed
cost) and half is the cost of labor and machines (a variable cost). If the
average total cost of producing wheat is $8 and the price of wheat is $6, what
would you advise the farmer to do? (“Grow something else” is not allowed.)



 

 




 

 
 
Worksheet

 		
 
 
Learning Objective: 13-03 Determine the output and profit of a perfect
 competitor graphically and numerically.

 		
 
 
273

 		


 

 
 
Question and Exercise 13-16

 		
 
 
Section: Total Profit at the Profit-Maximizing Level of Output

 		
 
 
 

 		








 



13.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-16 (algo)



A farmer is producing where MC = MR. Say
that half of the cost of producing wheat is the rental cost of land (a fixed
cost) and half is the cost of labor and machines (a variable cost). If the
average total cost of producing wheat is $28 and the price of wheat is $22,
what would you advise the farmer to do? (“Grow something else” is not allowed.)



 

 




 

 
 
Worksheet

 		
 
 
Learning Objective: 13-03 Determine the output and profit of a perfect
 competitor graphically and numerically.

 		
 
 
273

 		


 

 
 
Question and Exercise 13-16 (algo)

 		
 
 
Section: Total Profit at the Profit-Maximizing Level of Output

 		
 
 
 

 		








 



14.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-17



Based on the
following table:




 

 
 
Output

 		
 
 
Price

 ($)

 		
 
 
Total Costs

 ($)

 		


 

 
 
 0

 		
 
 
10

 		
 
 
 31

 		


 

 
 
 1

 		
 
 
10

 		
 
 
 40

 		


 

 
 
 2

 		
 
 
10

 		
 
 
 45

 		


 

 
 
 3

 		
 
 
10

 		
 
 
 48

 		


 

 
 
 4

 		
 
 
10

 		
 
 
 55

 		


 

 
 
 5

 		
 
 
10

 		
 
 
 65

 		


 

 
 
 6

 		
 
 
10

 		
 
 
 80

 		


 

 
 
 7

 		
 
 
10

 		
 
 
100

 		


 

 
 
 8

 		
 
 
10

 		
 
 
140

 		


 

 
 
 9

 		
 
 
10

 		
 
 
220

 		


 

 
 
10

 		
 
 
10

 		
 
 
340

 		








a. The profit-maximizing output is



b. In the long run, the market price willrise because 





 




 

 
 
Worksheet

 		
 
 
Learning Objective: 13-04 Explain the adjustment process from
 short-run equilibrium to long-run equilibrium.

 		
 
 
279

 		


 

 
 
Question and Exercise 13-17

 		
 
 
Section: Adjustment from the Short Run to the Long Run

 		
 
 
 

 		








 



 15.



award:

6.25 out of

6.25 points



 



 



 



Question and Exercise 13-17 (algo)



Based on the
following table:




 

 
 
Output

 		
 
 
Price

 ($)

 		
 
 
Total Costs

 ($)

 		


 

 
 
 0

 		
 
 
10

 		
 
 
6

 		


 

 
 
 1

 		
 
 
10

 		
 
 
11

 		


 

 
 
 2

 		
 
 
10

 		
 
 
14

 		


 

 
 
 3

 		
 
 
10

 		
 
 
15

 		


 

 
 
 4

 		
 
 
10

 		
 
 
18

 		


 

 
 
 5

 		
 
 
10

 		
 
 
24

 		


 

 
 
 6

 		
 
 
10

 		
 
 
34

 		


 

 
 
 7

 		
 
 
10

 		
 
 
48

 		


 

 
 
 8

 		
 
 
10

 		
 
 
67

 		


 

 
 
 9

 		
 
 
10

 		
 
 
93

 		


 

 
 
10

 		
 
 
10

 		
 
 
129

 		








a. The profit-maximizing output is units.



b. In the long run, the market price will because .





 




 

 
 
Worksheet

 		
 
 
Learning Objective: 13-04 Explain the adjustment process from
 short-run equilibrium to long-run equilibrium.

 		
 
 
279

 		


 

 
 
Question and Exercise 13-17 (algo)

 		
 
 
Section: Adjustment from the Short Run to the Long Run

 		
 
 
 

 		








 



 16.



award:



6.25 points



 



 



 



Question and Exercise 13-21



Use the accompanying
graph, which shows the marginal cost and average total cost curves for the shoe
store Zapateria, a perfectly competitive firm.




 

 
 
 

 		
 






a. If the market price of shoes is $70 a pair, Zapateria will prod pairs.



b. If the market price of shoes is $70 a pair, Zapateria will earn total profit
equal to $.



c. Should Zapateria expect more shoe stores to enter this market? Why or why
not?





d. Assuming the shoe market is a constant-cost industry, the long-run equilibrium
price is .





 




 

 
 
Graphing

 		
 
 
Learning Objective: 13-04 Explain the adjustment process from
 short-run equilibrium to long-run equilibrium.

 		
 
 
279

 		


 

 
 
Question and Exercise 13-21

 		
 
 
Section: Adjustment from the Short Run to the Long Run

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