If the interest rate is 20 percent, 100 to be received four years ...

[lak]

If the interest rate is 20 percent, 100 to be received four years from today has a present value of approximately
 
  A) 48.
  B) 69.
  C) 80.
  D) 100.

Question 2

The above figure shows the cost curves of a profit-maximizing perfectly competitive firm. If the price equals 7,
 
  a) how much will the firm produce?
  b) how much is the firm's average total, average variable, and marginal costs?
  c) how much is the firm's total, total variable, and total fixed costs?
  d) how much is the firm's total revenue and economic profit?
  e) what will happen in this market in the long run?

[welcom1000]

Answer to Question 1

A

Answer to Question 2

a) The firm will produce 40 units of output because that is where the marginal revenue equals the marginal cost.
b) The firm's average total cost equals 4, its average variable cost equals 3, and its marginal cost equals 7.
c) The firm's total cost is 160 (= 4  40 ), its total variable cost is 120 (= 3  40 ), and its total fixed cost is 40 (= 160 - 120 ).
d) The firm's total revenue is 280 (= 7  40 ) and its economic profit is 120 (= 280 - 160 ) .
e) In the long run, firms will enter the market in response to the economic profit. The market supply curve will shift rightward, the price will fall, and the economic profit will be eliminated.