76. Refer to the above data. If the market price for the firm\'s product is $12,

Question

76. Refer to the above data. If the market price for the firm's product is $12, the competitive firm will produce:
A. 4 units at a loss of $109.
B. 4 units at an economic profit of $31.75.
C. 8 units at a loss of $48.80.
D. zero units at a loss of $100.

77. Refer to the above data. If the market price for the firm's product is $32, the competitive firm will produce:
A. 8 units at an economic profit of $16.
B. 6 units at an economic profit of $7.98.
C. 10 units at an economic profit of $4.
D. 7 units at an economic profit of $41.50.

Explanation / Answer

76) Profit is maximized at MR=MC= Price; however, at the profit maximizing point of 4 units of output. But at this point the AVC is higher than the price of $12. This makes the firm unable to cover even its variable costs Thus, the firm has to shut down or produces zero output.

77) At a market price of $32, profit is maximized at 8 units of output. Here, we can observe that the price is above the AVC. and the MC approximately equals to price. And the firm generates positive profit. Economic profit = 8( 32 -30) = 16..

78) At a market price of $28, profit is maximized at 7 units of output. Here, we can observe that the price is above the AVC. And the MC approximately equals to price. And the firm generates a loss. The firm can still stay in business as its price is above the AVC.

Economic profit = 7( 28 -30) = a loss of $14

Related Questions

Navigate

• Browse (All)
• Browse 7
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.