On number 18 I know the answer but how do I get the answer? ue is greater than m

Question

On number 18 I know the answer but how do I get the answer?

ue is greater than marginal cost. 17) The perfectly competitive firm's marginal revenue curve is A) exactly the same as the marginal cost curve. B) downward-sloping, at twice the (negative) slope of the market demand curve. C) vertical. D) horizontal. E) upward-sloping 18) Suppose a firm's total cost and marginal cost are given by TCCapital 192+10Q+ 3Q2 and MC 10 + 6Q. What is the output level that minimizes average total cost? A) 8 24 1.5 C)21 D) 4 19) Refer to the diagram. Suppose the firm is producing at point Z and wants to reduce its output to Q1. Which of the following tatements is TRUE? A)In the short run, the firm will move to point A, where total costs214 6 of production are higher than at point C B) The firm will move along its long-run expansion path from point Z to point A. c) In the short run, the firm will move to point A, where total costs of production are low D) In the long run, the firm will move to point A, where total costs of production are lov

Explanation / Answer

Question 17

A perfectly competitive firm acts as the price-taker.

Since, price is given for the perfectly competitive firm, each additional units it sells brings in a revenue equal to price.

Due to this, marginal revenue curve of a perfectly competitive firm is a horizontal straight line at given price.

Hence, the correct answer is the option (D).

Question 18

TC = 192 + 10Q + 3Q2

Calculate the average total cost -

ATC = TC/Q = (192 + 10Q + 3Q2)/Q = (192/Q) + 10 + 3Q

Average total cost is at its minimum when it is equal to marginal cost.

ATC = MC

(192/Q) + 10 + 3Q = 6Q + 10

(192/Q) + 3Q - 6Q = 10 - 10

(192/Q) - 3Q = 0

192/Q = 3Q

192 = 3Q2

Q2 = 192/3

Q2 = 64

Q = 8

So,

The output level that minimizes average total cost is 8 units.

Hence, the correct answer is the option (A).

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