Answered: ) How does a competitive firm determine…

) How does a competitive firm determine its profit-maximizing level of output? Explain When does a profit-maximizing competitive firm decide to shut down? When does it decide to exit a market?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Firms In Competitive Markets

Section13.2: Profit Maximization And The Competitive Firm's Supply Curve

Problem 2QQ: How does a competitive firm determine its profit-maximizing level of output? Explain. When does a...

See similar textbooks

Related questions

Q: 1. Which of the following, in perfect competition, is most likely to shift a market’s supply curve…

A: Supply curve would shift to right If there is an improvement in production technology.

Q: 1. Suppose the price determined by the market is 18. Assume a perfectly competitive industry. Show…

A: A market is the collection of buyers and sellers. There are different forms of markets based on…

Q: A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has…

A: The minimum efficient scale of production is the level of output at which the long-run average total…

Q: A perfectly competitive firm's demand curve is perfectly elastic at the market-determined price.…

A: Given The statement is A perfectly competitive firm's demand curve is perfectly elastic at the…

Q: Why is the demand curve facing a firm in an imperfectly competitive industry downward sloping? What…

A: Any economic market that does not meet the rigorous assumptions of a hypothetical perfectly…

Q: Outline the determinants of entry and exit by firms in competitive markets. Explain the impact on…

A: The perfect competition is the form of market with large number of buyers and sellers, selling…

Q: Consider the following setup for a perfectly competitive market: Suppose that for the firm,…

A: Under perfect competition, a firm's decision to enter or leave the market depends upon profit is…

Q: 9. Which of the following best explains why a price-taker firm faces a horizontal demand curve at…

A: A price taker firm is the firm which takes the prevailing market price of a service or good as given…

Q: How does a competitive firm determine its profit-maximizing level of output? Explain When does a…

A: Competitive firm: In a perfectly competitive market, firms do not have control in changing the…

Q: What two rules does a perfectly competitive firm apply to determine its profit maximizing quantity…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: 8. Suppose a firm in a perfectly competitive market (where firms are price-takers) faces a revenue…

A: Perfectly competitive market is defined as a market scenario in which huge number of firms are…

Q: 11. In the long run, --- -will- ----the industry so that the market supply curve shifts to the .. .…

A: The following will be explained through the supply curve.

Q: 8. Which one of the following statements below on a competitive industry with zero entry costs and…

A: When firms are free to entry and exit then it is a competitive industry. If market price is higher…

Q: #10. The market for watches is perfectly competitive and is currently in equilibrium. What will…

A: Perfect competition is a market structure where there is a large number of buyers and sellers…

Q: Suppose you start a business of manufacturing computer software. Assume that this computer software…

A: Given the fixed cost = Tk. 60000 Total cost = Tk. 140000 AC = 1400001000AC = 140 Variable cost = TC…

Q: What if the information regarding market demand and market supply is conveyed in equations rather…

A: Given Market demand equation is given as Q=10-P . .... (1) Market supply equation Q=P.…

Q: Is the firm making an economic profit or loss? Will firms enter or exit this market? 3. Sketch on…

A: 1. The firm is operating at the point where the marginal revenue equals the marginal cost in the…

Q: Question 6 Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the…

A: A competitive firm is one that operates its business in the market with high competition as all the…

Q: Suppose the book-printing industry is a competitive market, and it begins with a long run…

A: In following graph, left panel depicts the market equilibrium where demand and supply curves (D0 and…

Q: Identify a market that resembles some of the key characteristics of a perfectly competitive market…

A: We will answer the first question since the exact one was not specified. Please submit a new…

Q: 1. The following table shows information on equilibrium price and different costs at the profit…

A: Price $3 Quantity of output produced 60 units Total Revenue $180 Average Total Cost $12…

Q: QUESTION 2: Consider a competitive market. There are X number of firms in this market. Every firm is…

A: Ans.(a): As the number of firms in a market goes on increasing, the competitive market form becomes…

Q: The demand curve facing a competitive firm The following graph shows the daily market for…

A: Equilibrium price is at the intersection of demand and supply curves. Equilibrium price is the…

Q: In principle, how do we determine a perfectly competitive firm's profit-maximizing output and…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: In a perfectly competitive market, industry demand is given by Q = 1000 – 20P. The typical firm’s…

A: Answer to the question is as follows :

Q: Your firm operates in a perfectly competitive market. The market price is above both your firm’s…

A: Here in the Y axis is the price of commodity and in x axis the demand for the commodity. The price…

Q: 11. Consider a competitive market where firms have U-shaped cost curves. Which of the following is…

A: The MC curve above the AVC is the short-run supply curve of a firm that is ALWAYS upward sloping. It…

Q: 19. The figure shows the short run conditions of a firm in a perfectly competitive market. In the…

A: Since you have asked multiple questions, we will answer the first question. If you want any specific…

Q: Concept Question 2.11 Question Help Suppose that a perfectly competitive firm faces a market price…

A: The profit maximizing (loss-minimizing) level of output would be where price equates the marginal…

Q: Question #1: Assume agricultural products are identical and there are many sellers and buyers of…

A: (a) In a perfect competitive market, firms maximize benefit when Price = MR = MC.

Q: Rebecca owns Louisiana Sugar Company, a manufacturer of sugar. Since there are lots of domestic…

A: Brand differentiation is the aspect through which firms try to attract customers so that the demand…

Q: If it is not in long-run equilibrium, what will happen in this industry to restore long-run…

A: Answer 10) In the long run, since the firms currently are making abnormal/ excess profits, more and…

Q: Suppose that the market for candles is a competitive market. The following graph shows the daily…

A: Profit Maximization is defined as a process taken up by the firms to make sure that the best output…

Q: 7 A local tavern in a perfectly competitive market was in a long-run equilibrium. Then, a scientific…

A: Answer -

Q: How does a competitive firm determine its profit-maximizing level of out put? Explain. . When does a…

A: A competitive firm determines its profit maximizing level of output when P= MR= MC When the…

Q: 3. Consider the perfectly competitive markets for bottled water in two cities, A and B. Both have a…

A: Perfect competition is a type of market structure where the number of sellers and buyers are working…

Q: 7) Assume that the dairy industry is initially in a perfectly competitive equilibrium. Assume that,…

A: Let the dairy industry face a linear downward-sloping demand curve. The long-run average cost curve…

Concept explainers

Profit Maximization

Economic activity is related to the use of scarce resources of the economy that are used for producing goods and services which are required to satisfy various demands of the people. In other words, it can be said that it is all about satisfying the unlimited demands of individuals with the limited resources available. The production decision is taken by the producers or the firms. In economics, the terms ‘producers’, ‘suppliers’, and ‘firms’ are interchangeable. Now the question arises, what does a firm actually mean?

Question

100%

4) How does a competitive firm determine its profit-maximizing level of output? Explain When does a profit-maximizing competitive firm decide to shut down? When does it decide to exit a market?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Assuming that the market for cigarettes is in perfect competition, what does allocative and productive efficiency imply in this case? What does it not imply?
A. If a firm operating in a perfectly competitive market doubles the amount it sells, what happens to the price of its output and its total revenue? B. How does a competitive firm determine its profit-maximizing level of output? When does a competitive firm decide to temporarily shut down in the short run? Explain, using the concepts of marginal cost, marginal revenue, price, and average variable cost.
How does a competitive firm determines its profit-maximising level of output? Explain. When does a profit-maximising competitive firm decide to shut down? When does it decide to exit a market? Draw diagram.
A) How does a competitive firm determine its profit-maximizing level of output? Explain.
2. The Competitive Equilibrium. Consider a competitive firm with the cost function TC = 1600 +4Q². a. Suppose that P = 200. What is the optimal level of output for the firm? What are profits or losses for this firm? Optimal Output: Profits or Losses
1. Identify a market that resembles some of the key characteristics of a perfectly competitive market and discuss each of these characteristics of the market in detail 2. Has any particular firm in this market found a way to differentiate or distinguish itself from its competitors? If so, what did the firm do? If not, what prevents the firm from differentiating itself?
3. Consider the perfectly competitive markets for bottled water in two cities, A and B. Both have a downward-sloping demand curve and upward-sloping supply curve, and each market is currently in long run equilibrium at the same price. The demand curves are similar, but in city A the supply curve is more price elastic than in city B. a) There's a shock: an accident causes the tap water in the area to become undrinkable. In two diagrams, one for each city, compare the effect on price and quantity traded in the two cities, assuming that a new equilibrium is reached. Explain your diagrams. b) Following on from your answer to a), explain what would happen in the model to the number of suppliers and their profitability, in each of the short run and the long run.
4. Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 +÷q? Marginal cost: MC = q; where q is an individual firm's quantity produced. The market demand curve for this product is Demand: Demand: QD = 120 – P , where P is the price and Q is the total quantity of the good in the market. Currently, there are 9 firms in the market. In each following question, please explain how you find the answer! 4.1 What is the equilibrium price and quantity for this market in the short run? 4.2 In this equilibrium, how much does cach firm produce? Calculate cach firm's profit or loss. Is there incentive for firms to enter or exit? 4.3 In the long run with free entry and exit, what is the equilibrium price and quantity in this market? 4.4 In this long-run equilibrium, how much does each firm produce? How many firms are in the market?
2. Consider the following economic scenario: A new korean restaurant opens in a city. People are initially cautious about eating new food items, until an influential health report warns consumers against grilled meat and suggest that they increase their consumption of Korean foods. As a result, demand for Korean cuisine increases dramatically. Assuming that the market for Korean food is perfectly competitive, answer the questions below. a. In the story above, what should have happened to the short-run economic profit of the Korean restaurant as a result of the health report? b. Assuming that demand remains high, what do you anticipate will happen to the number of korean restaurants in the city over the long run? c. Would you predict that the first korean restaurant would be able to sustain positive economic profit over the long run? Explain your answer. Using one graph of the market as a whole and one graph of a representative firm's cost curves, illustrate your answers to parts a - c.…
2. Consider the following economic scenario: A new korean restaurant opens in a city. People are initially cautious about eating new food items, until an influential health report warns consumers against grilled meat and suggest that they increase their consumption of Korean foods. As a result, demand for Korean cuisine increases dramatically. Assuming that the market for Korean food is perfectly competitive, answer the questions below. a. In the story above, what should have happened to the short-run economic profit of the Korean restaurant as a result of the health report? b. Assuming that demand remains high, what do you anticipate will happen to the number of korean restaurants in the city over the long run? c. Would you predict that the first korean restaurant would be able to sustain positive economic profit over the long run? Explain your answer. d. Using one graph of the market as a whole and one graph of a representative firm's cost curves, illustrate your answers to parts a -…
Suppose the book-printing industry is a competitive market, and it begins with a long run competitive equilibrium. a. Draw side-by-side diagrams to show the initial conditions of the bookprinting industry, including the condition of a typical book-printing firm and the whole industry. b. Given the rising popularity of e-books, the demand for book-printing drops. Based on the diagrams in (a), illustrate the short run effects on the market price, market output level, output level of an typical bookprinting firm and her profit. Briefly explain.
1. The accompanying graph summarizes the demand and costs for a firm that operates in a perfectly competitive market. a. What level of output should this firm produce in the short run? b. What price should this firm charge in the short run? c. What is the firm's total cost at this level of output? d. What is the firm's total variable cost at this level of output? e. What is the firm's fixed cost at this level of output? f. What is the firm's profit if it produces this level of output? g. What is the firm's profit if it shuts down? h. In the long run, should this firm continue to operate or shut down? $48 ******* 46 44 42 40 38 36 34 32 30 28 26 24 22 20 18 16 14 12 10 8 6 MC 4 2 0- 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 10 ATC Df=MR AVC AFC -Quantity