2.10 The long-run average cost curve for an industry is repre- sented in the following graph. Add short-run average cost curves and short-run marginal cost curves for three firms in this industry, with one firm producing an output of 10,000 units, one firm producing an output of 20,000, and one firm producing an output of 30,000. Label these as Scale 1, Scale 2, and Scale 3, respectively. What is likely to happen to the scale of each of these three firms in the long run? Cost per unit ($) LRAC

2.10 The long-run average cost curve for an industry is repre- sented in the following graph. Add short-run average cost curves and short-run marginal cost curves for three firms in this industry, with one firm producing an output of 10,000 units, one firm producing an output of 20,000, and one firm producing an output of 30,000. Label these as Scale 1, Scale 2, and Scale 3, respectively. What is likely to happen to the scale of each of these three firms in the long run? Cost per unit ($) LRAC

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 21P

See similar textbooks

Similar questions

How would an improvement in technology, like the high-efficiency gas turbines or Pirelli tire plant, affect me lung-nm average cost curve of a firm? Can you draw the old curve and the new one on the same axes? How might such an improvement affect other firms in the industry?
A computer company produces affordable, easy-to-use home computer systems and has fixed costs of 250. The marginal cost of producing computers is 700 for the first computer, 250 for the second, 300 for the third, 350 for the fourth, 430 for the fifth, 450 for the sixth, and 500 for the seventh. Create a table that shows the companys output, total cost, marginal cost, average cost, variable cost, and average variable cost. At what price is the zero-profit point? At what price is the shutdown point? If the company sells the computers for 500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss. If the firm sells the computers for 300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss.
Based on your answers to the WipeOut Ski Company in Exercise 7.3, now imagine a situation where the firm produces a quantity of 5 units that it sells for a price of 25 each. What will be the companys profits or losses? How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? At the given quantity and price, is the marginal unit produced adding to profits?
Suppose a firm producing table lamps has the following costs: Quantity Average Total Cost 1,000 $15.00 2,000 9.75 3,000 8.25 4,000 7.50 5,000 7.75 6,000 8.50 7,000 9.75 8,000 10.50 9,000 12.00 Ben and Jerry are managers at the company, and they have this discussion: Ben: We should produce 4,000 lamps per month because that will minimize our average costs. Jerry: But shouldn't we maximize profits rather than minimize costs? To maximize profits, don't we need to take demand into account? Ben: Don't worry. By minimizing average costs, we will be maximizing profits. Demand will determine how high the price we can charge will be, but it won't affect our profit-maximizing quantity. Evaluate the discussion between the two managers. Ben's assertion that the firm should produce the quantity of lamps where average costs are minimized is A. incorrect because profits are instead maximized…
Assume that the cost data in the following table are for a purely competitive producer: TotalProduct AverageFixed Cost AverageVariable Cost AverageTotal Cost Marginal Cost 0 1 $60.00 $45.00 $105.00 $45.00 2 30.00 42.50 72.50 40.00 3 20.00 40.00 60.00 35.00 4 15.00 37.50 52.50 30.00 5 12.00 37.00 49.00 35.00 6 10.00 37.50 47.50 40.00 7 8.57 38.57 47.14 45.00 8 7.50 40.63 48.13 55.00 9 6.67 43.33 50.00 65.00 10 6.00 46.50 52.50 75.00 Instructions: If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers. Select "Not applicable" and enter a value of "0" for output if the firm does not produce. a. At a product price of $56.00 (i) Will this firm produce in the short run? (Click to select) No Yes (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? (Click to select) Not applicable Loss-minimizing…
Assume that the cost data in the following table are for a purely competitive producer: TotalProduct AverageFixed Cost AverageVariable Cost AverageTotal Cost Marginal Cost 0 1 $ 60.00 $ 45.00 $ 105.00 $ 45.00 2 30.00 42.50 72.50 40.00 3 20.00 40.00 60.00 35.00 4 15.00 37.50 52.50 30.00 5 12.00 37.00 49.00 35.00 6 10.00 37.50 47.50 40.00 7 8.57 38.57 47.14 45.00 8 7.50 40.63 48.13 55.00 9 6.67 43.33 50.00 65.00 10 6.00 46.50 52.50 75.00 a. At a product price of $56.00 (i) Will this firm produce in the short run? yes (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? profit- maximizing output = 9 units per firm (iii) What economic profit or loss will the firm realize per unit of output? Profit per unit = $ 16 b. At a product price of $41.00 (i) Will this firm produce in the short run? Yes (ii) If it is preferable to produce, what will be the…
In the short-run, if the marginal cost of a firm in a competitive industry is upward sloping while itsaverage variable cost is downward sloping, what can you say about slope of average total cost?
You have the following information about long-run total cost for the following firms: Quantity Arnold’s Apples LRATC Belle’s Bananas LRATC Cam’s Cantaloupes LRATC 1 120 33 42 2 140 72 68 3 160 117 98 4 180 168 132 5 200 225 170 6 220 288 212 7 240 357 258 Do any of these firms experience economies of scale? How do you know?
estion 4 of 30 Each graph illustrates three short run cost curves for firms, where ATC is average total cost (aka average cost), MC is marginal cost, and AVC is average variable cost. Which graph correctly represents the relationship between all three cost curves? О Cost MC Cost ATC MC ATC AVC AVC Output Output Cost MC Cost MC АТС AVC AVC АТС Output Output 8:14 PM 回节回 46°F 12/15/2021 近
QUESTION 17 Use the following table and use your previous calculations: find the quantity where ATC is at a minimum and find the quantity that is the most efficient operating point for the firm. Total Output Total Cost TFC TVC AFC AVC ATC MC 0 $20 10 $40 20 $60 30 $90 40 $120 50 $180 60 $280 a. MC = ATC between 30 and 40 Quantity ATC at minimum between 20 and 40 Quantity b. MC = ATC at 30 Quantity ATC at minimum between 20 and 40 Quantity c. MC = ATC at 40 Quantity ATC at minimum between 20 and 40 Quantity d. MC = ATC between 30 and 40 Quantity ATC at minimum between30 and 40 Quantity e. MC = ATC between 20 and 40 Quantity ATC at minimum between 20 and 40 Quantity
You have the following information about long-run total cost for the following firms: Quantity Arnold’s Apples LRATC Belle’s Bananas LRATC Cam’s Cantaloupes LRATC 1 120 33 42 2 140 72 68 3 160 117 98 4 180 168 132 5 200 225 170 6 220 288 212 7 240 357 258 Do any of these firms experience diseconomies of scale? How do you know?
Macmillan Learning (Figure: The Cost Curves for Charlie's Cookie Confections) Use Figure: The Cost Curves for Charlie's Cookie Confections. The curve labeled X represents the firm's Cost per unit marginal O average 0 fixed costs per unit O variable costs per unit. cost curve. V W xह Y Quantity