on on the basis of the following data confronting a firm: 30) Marginal Marginal
ID: 1104939 • Letter: O
Question
on on the basis of the following data confronting a firm: 30) Marginal Marginal Output Revenue cost 0 2 4. $16 16 16 16 16 $10 13 17 21 5 Refer to the data. If the firm's minimum average variable cost is $10, the firm's profit-maximizing level of output would be: A) 4 B) 5. D) 3. 31) If a firm is confronted with economic losses in the short run, it will decide whether or 31)- not to produce by comparing: A) total revenue and total cost. B) price and minimum average variable cost. C) total revenue and total fixed cost. D) marginal revenue and marginal cost. 32) The short-run supply curve of a purely competitive producer is based primarily on its: C) AVC curve D) MC curve. 32) A) ATC curve. B) AFC curve 33) On a per unit basis, economie profit can be determined as the difference bet A) average fixed cost and product price. B) marginal revenue and product price. C) marginal revenue and marginal cost. D) product price and average total cost 34) The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of known as the producing it is A) shut-down rule. C) output-maximizing rule. B) break-even rule. D) profit-maximizing rule. A) is realized only in constant-cost industries. B) is not economically efficient. C) results in zero economic profits D) will never change once it is realized 35) Long-run competitive equilibrium:Explanation / Answer
We have been given the following information
Output
Marginal Revenue ($)
Marginal Cost ($)
0
…
…
1
16
10
2
16
9
3
16
13
4
16
17
5
16
21
Part 1) The profit maximizing level of a firm is where the marginal cost (MC) is equal to the price which is equal to the marginal revenue (MR) in competitive markets. Since, the MR is constant so it means the price is also constant and equal to the MR.
So, in the present case Price = MR, which needs to be equal to the MC
At output level of 4, the profit of the firm is maximized. So, option A is correct.
Part 2) If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing price and minimum average variable cost.
Part 3) The short run supply curve of a purely competitive producer is based primarily on its marginal cost (MC) curve.
Part 4) On a per unit basis, economic profit can be determined as the difference between product price and average total cost.
Part 5) The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the profit maximizing rule.
Part 6) Long-run competitive equilibrium results in zero economic profits.
Output
Marginal Revenue ($)
Marginal Cost ($)
0
…
…
1
16
10
2
16
9
3
16
13
4
16
17
5
16
21
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