Refer to Figure 12-18. Use the figure above to answer the ...

[asmith134]

Refer to Figure 12-18. Use the figure above to answer the following questions.
 
  a. How can you determine that the figure represents a graph of a perfectly competitive firm? Be specific; indicate which curve gives you the information and how you use this information to arrive at your conclusion.
  b. What is the market price?
  c. What is the profit-maximizing output?
  d. What is total revenue at the profit-maximizing output?
  e. What is the total cost at the profit-maximizing output?
  f. What is the profit or loss at the profit-maximizing output?
  g. What is the firm's total fixed cost?
  h. What is the total variable cost?
  i. Identify the firm's short-run supply curve.
  j. Is the industry in a long-run equilibrium?
  k. If it is not in long-run equilibrium, what will happen in this industry to restore long-run equilibrium?
  l. In long-run equilibrium, what is the firm's profit maximizing quantity?

Question 2

Refer to Figure 11-14. Which of the following could explain why the United States and China use different input combinations to produce a given quantity of cotton and yet, each country produces that quantity at the lowest possible cost?
 
  A) because the United States has more sophisticated technology and therefore is more efficient in cotton production
  B) because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in the United States
  C) because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in China
  D) because the marginal product per dollar spent on capital yields a higher return in the United States than in China

[atrochim]

Answer to Question 1

a. The perfectly competitive firm is a price taker and therefore faces a perfectly elastic demand curve which is also the MR curve.
b. Market price = 40
c. Profit maximizing output = 200
d. Total revenue = 40  200 = 8,000
e. Total cost = ATC  total output = 24  200 = 4,800
f. Profit = Total revenue - total cost = 8,000 - 4,800 = 3,200
g. Total fixed cost = AFC  total output = (ATC - AVC)  150 = 6  150 = 900. (Note: fixed cost has the same value at all output rates)
h. The total variable cost at the profit maximizing output level = (4,800 -

Answer to Question 2

C

[asmith134]

YES! Correct, THANKS for helping me on my review

[Liamb2179]

Gracias!