The demand and cost schedules for a firm in monopolistic competition are in the above tables
What is the profit-maximizing level of output and price? What amount of profit is the firm earning? Is this firm in a short-run or long-run equilibrium? Why?
To determine the quantity produced, the firm will set marginal cost equal to marginal revenue. Therefore it is necessary to determine the marginal revenue. The marginal revenue going from 3 to 4 units is $12 and the marginal revenue going from 4 to 5 units is $8. Thus the marginal revenue at 4 units is $10, which equals the marginal cost. Therefore the firm produces 4 units. The demand schedule shows that for 4 units, the price will be $16 per unit. The firm's economic profit per unit equals the price, $16, minus its average total cost, $10.50, or an economic profit of $5.50 per unit. The firm produces 4 units, so its total economic profit is $22.00. The firm is in a short-run equilibrium because it is able to earn an economic profit. In the long run, entry will decrease its demand so that it no longer can earn an economic profit.
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Because of a decrease in the wage rate it must pay, a perfectly competitive firm's marginal costs decrease but its demand curve stays the same. As a result, the firm
A) decreases the amount of output it produces and raises its price. B) increases the amount of output it produces and lowers it price. C) increases the amount of output it produces and does not change its price. D) decreases the amount of output it produces and lowers its price.
Which of the following is a microeconomics question?
A) What determines the average price level and inflation? B) How much will be saved and how much will be produced in the entire economy? C) What will the level of economic growth be in the entire economy? D) What factors determine the price of carrots?