Question
In: Economics
When the Price (marginal revenue) is less that Average Total Cost, but more than Average Variable Cost
When the Price (marginal revenue) is less that Average Total Cost, but more than Average Variable Cost, the firm is making ___________ (positive profit/negative profit) and should __________ (shut down/stay in business).
Solutions
Expert Solution
Ans. Negative profit; stay in business
When price is greater than average variable cost but less than average total cost, the firm incurs loss. The firm is able to cover its variable cost which is its operating cost and is not able to cover the fixed cost which it has to incur in the short run. But since the firm is able to cover the operating costs of production, it is beneficial for the firms to keep on producing and to stay in the business since even if they shut down the business they will have to incur the fixed costs. This way it is better for the firms to stay in the business and keep producing and incurring negative profits.
Rahul Sunny answered 2 years agoRelated Solutions
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
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If the price was slightly less than average total cost, but
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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 exceeds the minimum of average variable cost, then comparing marginal revenue to marginal cost...
If price exceeds the minimum of average variable cost, then
comparing marginal revenue to marginal cost indicates how much
additional profit is generated by the last unit of production and
tells a firm whether it should increase output, decrease output or
remain at the present level of output.
True
False
If the firm’s marginal cost is equal to its marginal revenue at
the firm’s existing level of production, then the firm should
maintain its current level of production to maximize...
If price exceeds the minimum of average total cost, then comparing marginal revenue to marginal cost...
If price exceeds the minimum of average total cost, then
comparing marginal revenue to marginal cost
(x) tells a firm the total amount of profit that it will
generate.
(y) indicates how much additional profit is generated by the last
unit of production.
(z) tells a firm whether it should increase output, decrease output
or remain at the present level of output.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and...
1. We know that average _______ cost is ______ when marginal cost is less than average...
1.
We know that average _______ cost is ______ when marginal cost
is less than average total cost.
variable; rising
fixed; rising
total; falling
total; rising
2.
In the short run, if a company shuts down, which of the
following will happen?
Total revenue will be zero, but total fixed costs will still
have to be paid.
Total revenue will be zero, and total costs will be zero.
Total economic profit will be zero, and total costs will be
positive....
Question 1 Output total cost marginal cost fixed cost average cost Total revenue average revenue Marginal...
Question 1
Output
total cost
marginal cost
fixed cost
average cost
Total revenue
average revenue
Marginal
revenue
0
10
0
1
16
20
2
26
40
3
40
60
4
60
80
5
88
100
6
120
120
A) Complete the missing data on the table
B) What is the selling price of a laptop case explain your
answer
c) What is the profit maximizing level of output for this firm
explain your answer
d) create a graph using three...
Pickup (Q) Price/Pickup Total Revenue (TR) Marginal Revenue (MR) Total Cost (TC) Marginal Cost (MC) Average...
Pickup (Q) Price/Pickup Total Revenue (TR) Marginal Revenue
(MR) Total Cost (TC) Marginal Cost (MC) Average Total Cost
(ATC)
0 $4.20 0 --- $3.20 --- ---
1 $3.80 $4.20
2 $3.40 $5.60
3 $3.00 $7.80
4 $2.60 $10.40
5 $2.20 $13.40
6 $1.90 $16.80
Complete the table above, then answer the following
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marginal cost are important determinants of a monopolist's profit
maximizing price and output. As part of your answer, explain the
process in a monopolistic market at an output below the profit
maximizing output, and at the output above, and why the profit
maximizing output is eventually chosen.
What is marginal revenue? What is marginal cost? Why is a monopolist's marginal revenue less than...
What is marginal revenue?
What is marginal cost?
Why is a monopolist's marginal revenue less than the price it
charges for its product? d) Explain why marginal revenue and
marginal cost are important determinants of a monopolist's profit
maximizing price and output. As part of your answer, explain the
process in a monopolistic market at an output below the profit
maximizing output, and at the output above, and why the profit
maximizing output is eventually chosen.
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