9. In the long run, the typical firm in this market will produce a quantity equa
ID: 1110438 • Letter: 9
Question
9. In the long run, the typical firm in this market will produce a quantity equal to Market TC Pi Qi 42 43 B. D. Q A. q q2 4 C.q 10. I get $300 revenue from the sale of my product each day. I own premises that I use for production. I can rent the premises for $50 a day but I don't charge myself rent. The raw materials of the operation cost $150 a day. I do all the work myself. Recently, a competitor offered me $100 a day to work for him. Both jobs are equally attractive as far as the work is concerned. My accounting profit is and my economic profit is A. 150; 100 B. 300; 150 C. 150;0 D. 150;-150Explanation / Answer
Question 9
The given figure shows that price is decided by the market taking into account market demand and market supply and individual firm acts as the price taker (indicated by horizontal price line at price, P1, as decided by the market).
An individual firm acts as price taker in perfectly competitive market.
So, the given firm is a perfectly competitive firm.
In long-run, a perfectly competitive firm produce that level of output corresponding to which price equals minimum average total cost.
ATC is minimum at q3 level of output.
So, in long-run, this firm will produce q3 level of output.
Hence, the correct answer is the option (C).
Question 10
Revenue = $300
Operation cost = $150
Rent foregone = $50
Salary foregone = $100
Operation cost is the explicit cost while rent foregone and salary foregone are implicit cost.
Calculate the accounting profit -
Accounting profit = Revenue - Explicit cost = $300 - $150 = $150
Calculate the economic profit -
Economic profit = Revenue - Explicit cost - Implicit cost = $300 - $150 - $50 - $100 = $0
So,
My accounting profit is $150, and my economic profit is $0.
Hence, the correct answer is the option (C).
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