**PLEASE ANSWER ASAP** 1. Refe r to Figure 1. The firm’s profitmaximizing level
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Question
**PLEASE ANSWER ASAP**
1. Refer to Figure 1. The firm’s profitmaximizing level of output is
Select one:
a. 16
b. 24
c. 32
d. 48
2. Refer to Figure 1. In order to maximize profit, the firm will charge a price of
Select one:
a. 16
b. 24
c. 32
d. 36
3. Refer to Figure 1. Suppose that average total cost is $36 when Q=24. What is the profit-maximizing price and resulting profit?
Select one:
a. P=$24, profit=$0
b. P=$36, profit=$144
c. P=$36, profit=$48
d. P=$36, profit=$0
4. Refer to Figure 1. If the average total cost is $30 at the profitmaximizing quantity, then the firm’s maximum profit is
Select one:
a. 64
b. 96
c. 144
d. 480
5. Refer to Figure 1. If the average variable cost is $24 at the profitmaximizing quantity, and if the firm’s fixed costs amount to $60, then the firm’s maximum profit is
Select one:
a. -60
b. 196
c. 228
d. 288
6. Refer to Figure 1. If the average variable cost is $26 at the profitmaximizing quantity, and if the firm’s profit is $40 at that quantity, then its fixed costs amount to
Select one:
a. 12
b. 152
c. 200
d. 240
7. Refer to Figure 1. Suppose you were to add the ATC curve to the diagram to show the firm in a situation of long-run equilibrium. You would draw the ATC curve
Select one:
a. with its minimum at the point (Q = 24, P = $36).
b. with its minimum at the point (Q = 24, P = $24).
c. tangent to the demand curve at the point (Q = 24, P = $36).
d. tangent to the demand curve at the point (Q = 32, P = $32).
8. Refer to Figure 1. If the ATC=40 at the profit-maximizing level of output, which of the following will occur in the long run in this industry?
Select one:
a. Firms will exit this industry.
b. Firms will enter this industry.
c. This firm will continue to earn positive economic profits.
d. This firm will incur losses.
Explanation / Answer
1. The firm’s profit maximizing level of output is 24 because at that point MR = MC.
2. In order to maximize profit, the firm will charge a price of $36. Because it is determined by corresponding output level with market demand.
3. Suppose that average total cost is $36 when Q=24. What is the profit-maximizing price and resulting profit will be $36 and $0. Because at that point MR = MC so it is a profit maximizing condition. No firm can charge other price than this. And profit is 0 because Total Revenue = total cost.
4. If the average total cost is $30 at the profit maximizing quantity, then the firm’s maximum profit is 144.
Total Revenue = p * q = $36 * 24 = $864.
Total Cost = ATC * q = $30 * 24 = $720.
So profit = ($864 - $720) = $144.
5. If the average variable cost is $24 at the profitmaximizing quantity, and if the firm’s fixed costs amount to $60, then the firm’s maximum profit is $228.
Because, Total Revenue = $864.
Now Total variable cost = AVC * q = $24 * 24 = $576.
Fixed cost = $60
Total Cost = ($576 + $60) = $636.
Profit = TR - TC = $864 - $636 = $228.
6. If the average variable cost is $26 at the profitmaximizing quantity, and if the firm’s profit is $40 at that quantity, then its fixed costs amount to $200.
Total Revenue = $864.
Total Variable cost = $26 * 24 = $624.
Profit = TR - TC
=> 40 = $864 - TC
TC = $824
TC = Fixed cost + variable cost.
So, Fixed cost = $824 - $624 = $200.
7. Suppose you were to add the ATC curve to the diagram to show the firm in a situation of long-run equilibrium. You would draw the ATC curve tangent to the demand curve at the point (Q = 24, P = $36).
Because at that point there is no positive economic profit.
8. If the ATC = 40 at the profit-maximizing level of output, which of the following will occur in the long run in this industry the firms will exit this industry. Because at that point the firm will not recover any of the costs and incurs huge loss.
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