1.When TR=100,TC=140,TVC=80 and TFC=60, a factory should shut down or continue o
ID: 1189415 • Letter: 1
Question
1.When TR=100,TC=140,TVC=80 and TFC=60, a factory should shut down or continue operations? Why?
2.When TR=100,TC=190,TVC=130 and TFC=60, a factory should shut down or continue operations? Why?
3.Under the perfect competition, P=1000, AC=600, and MC equals P at 5 units. The AC curve touches a horizontal demand curve at 3 and 7 each other. Please calculate TR,TC and profit.
4.Compare demand curves of a perfectly competitive firm and a monopoly?
5.Compare four assumptions under perfect competition and monopolistic competition. How are these two different in terms of these assumptions?
Explanation / Answer
1.Factory should continue since factory is able to recover TVC which 80 and TR is 100.
2 Factory should shut down since it is not even able to recover the TVC
3 TR = P*Q
=1000*5
=$5,000
TC = AC*Q
=600*5
=3,000
Profit = 5,000 -3000
=$2,000
4.Demand curve for the competitive market is horizontal and in case of monopoly it is downward sloping
5. Perfectly competitive market:
Monopolistic competition
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