t (S) MC ATC AVC 1.25 1.05 90 .60 15 20 35 Output Rate 20. Refer to the above gr
ID: 1119457 • Letter: T
Question
t (S) MC ATC AVC 1.25 1.05 90 .60 15 20 35 Output Rate 20. Refer to the above graph. It shows the cost curves for a competitive firm. If the market price falls to S0.55, the optimal output rate is: a. 0 b. 15 d. More than 20, but less than 35 21. Which of the following best describe a monopolistically competitive firm? a. Supplies a small share of the market and sells a product that is not differentiated from other firms in the market. b. Supplies a large share of the market and sells a product that is not differentiated from other firms in the market c. Supplies a small share of the market and sells a product that is slightly different than its competitors. d. Supplies a large share of the market and sells a product that is slightly different than its competitors. 22. Perfect competition produces allocative efficiency in the long run because: a. Price equals average total cost b. Marginal cost equals average total cost c. Marginal revenue equals price d. Marginal cost equals price 23. Suppose that a firm produces 200,000 units a year and sells them for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm earns an accounting profit of a. $500,000 and an economic profit of $200,000 b. $400,000 and an economic profit of $200,000 c. $300,000 and an economic profit of $400,000 d. $200,000 and an economic profit of $500,000Explanation / Answer
20). The answer is 0. This is because when the market price falls to 0.55, 0 is the most apt out of the other choices. It cannot be 15, 20 or between 20 & 35 because $0.6 dollars is the least the seller will demand to supply the goods at equilibrium level
21) d). A monopolist usually supplies the largest share in a product market, with differentiated products from its competitors.
22). a). Price equals total average cost. This is because Price equals AR, and thus since AR = AC, the market is efficient in the long run.
23). Total firm's revenue = 200,000 * 10 = 2,000,000
TC (explicit) = 1,500,000
Profit = 500,000
Economic Profit = 500,000 - 300,000 = 200,000
Hence A is the answer
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