Assume that price is greater than average variable cost. If a perfectly competitive seller is producing...

Assume that price is greater than average variable cost. If a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54 (along the upward-sloping portion of the MC curve), then to maximize profits the firm should

continue producing at the current output.

produce a smaller level of output.

produce a larger level of output.

not enough information given to answer the question.

Solutions

Expert Solution

Ans.- produce a smaller level of output.

Here, P=MR=11 but MC=14.54. Here we have MR<MC, so smaller level of output should be produced to maximize profits.

If MR>MC,then larger level of output should be produced to maximize profits.

If MR=MC, output shouldn't be changed since firm is already maximizing profit.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Assume that price is greater than average variable cost. If a perfectly competitive firm is producing...

Assume that price is greater than average variable cost. If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profitminus−maximizing quantity. True False

If average variable cost is greater than price, a profit maximizing firm in a perfectly competitive...

If average variable cost is greater than price, a profit maximizing firm in a perfectly competitive market should * continue to produce its current output level. shut down in the short run. increase its output level to minimize its loss. none of the above.

1. If the market price is greater than _______ cost, a perfectly competitive firm can earn...

1. If the market price is greater than _______ cost, a perfectly competitive firm can earn economic profits in the short run. average variable marginal average fixed average total 2. The ___________ cost curve is closely associated with the firm's short-run supply curve in perfect competition. marginal average fixed average variable average total 3. Which of the following will not occur if demand falls in the competitive market? Less than normal profits are being earned during the adjustment to long-run...

If the price was slightly less than average total cost, but still greater than average variable...

If the price was slightly less than average total cost, but still greater than average variable cost, then the profit-maximizing, monopolistically competitive firm would Answer choices: produce an output amount that corresponded to the place where marginal cost equals marginal revenue and break even. produce an output amount where marginal cost equals marginal revenue and make a small profit. continue to produce an output amount that corresponded to the place where marginal cost equals marginal revenue, but make a small...

If price is less than a perfectly competitive firm's average total cost, the firm will continue...

If price is less than a perfectly competitive firm's average total cost, the firm will continue to produce if price is greater than average variable cost. the firm will shut down. the firm will exit the industry in the short run. the firm will continue to produce as long as price is greater than average fixed cost.

A perfectly competitive firm faces a price of $40 for the output it produces. Average Variable...

A perfectly competitive firm faces a price of $40 for the output it produces. Average Variable Cost for the firm is equal to $30 per unit and the firm's average fixed cost is equal to $20 per unit. Determine if the following statement is either True or False. The firm earns negative profits and should should shut down.

If the price is less than the average total cost but higher than the average variable...

If the price is less than the average total cost but higher than the average variable cost, then the firm is making a _________. a. loss and is making a negative contribution to fixed costs b. loss but will continue to produce in the short-run c. loss and will shut down in the short-run d. profit What two types of market scopes did Michael Porter use in developing his generic strategies model? Broad and narrow. Cost leadership and focus. Benefit...

A perfectly competitive firm's marginal cost curve above the average variable cost curve is its: Select...

A perfectly competitive firm's marginal cost curve above the average variable cost curve is its: Select one: a. total revenue curve. b. short-run supply curve. c. input demand curve. d. marginal revenue curve.

Assume that the market for fertilizer is perfectly competitive. Firms in the market are producing output...

Assume that the market for fertilizer is perfectly competitive. Firms in the market are producing output but they are experiencing economic losses. a.[5 marks] Explain how ATC, AVC and MC are related (Note: the relationship of these cost curves is same whether there is loss or profit). Explain how the price of fertilizer compares to the ATC, AVC and MC of producing fertilizer. b.[10 marks] Draw two graphs side by side illustrating the present situation for the single firm and...

Assume that the market for fertilizer is perfectly competitive. Firms in the market are producing output...

Assume that the market for fertilizer is perfectly competitive. Firms in the market are producing output but they are experiencing economic losses. a.Explain how ATC, AVC and MC are related (Note: the relationship of these cost curves is same whether there is loss or profit). Explain how the price of fertilizer compares to the ATC, AVC and MC of producing fertilizer. b. Draw two graphs side by side illustrating the present situation for the single firm and the entire market....

Subjects