In: Economics
1.
Manny’s Mowers operates in the perfectly competitive lawn mowing industry with a market price of $40 and MC = 4q. What is Manny’s profit maximizing output?
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2.
In the short run, any firm will operate at a loss as long as
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3.
Zayta is one of many widget saleswomen in the city of Metrosprawl and is able to sell as much as she likes at the market price of $150. Zatya’s total and marginal cost functions are given by TC = 5,000 + q2 and MC = 2q. How much profit will Zatya earn by producing the profit maximizing output?
Question 11 options:
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1.
a)10
Explanation :
Firm maximises it's profit where MR equals MC. In perfect competition price is equals to MR.
So, MR =MC
40=4Q
40/4=Q
10=Q
2.
B. the profit maximizing price is higher than the average variable cost of producing the profit maximizing output.
Explanation :
Firm will shutdown when price is below average variable cost. So when price is below average total cost but above average variable cost, firm will operate to minimise losses. Because if firm will shutdown, loss will be equal to fixed cost and if it will operate, loss will be some portion of fixed cost as some portion is covered by total revenue.
3.
B.$625
Explanation :
Firm maximises it's profit where MR equals MC and in perfect competition price is equals to MR.
MR =MC
150=2q
150/2=q
75=q.
Now profit =total revenue - total cost
=11250-10625
=625.
Total revenue =Price *quantity
=150*75
=11250.
Total cost =5000+q^2
=5000+(75)²
=5000+5625
=10,625