Author Question: Consider the total cost and revenue curves shown below, for two perfectly competitive firms, Firm A ... (Read 23 times)

trevg · **on:** Oct 12, 2022

Question 1

Consider a perfectly competitive firm producing and selling mousetraps at a market price of $5.00. Suppose this firm is producing 2000 mousetraps and average variable cost is $5.50. What level of economic profit is this firm earning?
◦ $0.50
◦ $1000
◦ -$1000
◦ $0
◦ There is insufficient information to answer to know.

Question 2

Consider the total cost and revenue curves shown below, for two perfectly competitive firms, Firm A and Firm B.

FIGURE 9-5

Refer to Figure 9-5. Given its total cost and revenue curves, Firm A should

◦ maximize its profits by producing that level of output such that the slope of the TC curve is equal to the slope of the TR curve.
◦ build another plant to reap scale economies.
◦ continue production, as it is earning positive profits.
◦ produce zero output.
◦ maximize its profits by producing that level of output such that the slope of the TVC curve is equal to the slope of the TR curve.

studyforce.com · **Reply #1 on:** Oct 12, 2022

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