Pic 3 Price Unit Costs MC P 9 Pic 3 shows the perfectly comp

Pic. 3 Price Unit Costs MC P: 9. Pic. 3 shows the perfectly competitive firm\'s long-run average and marginal costs. Based on this picture, A. in the long-run, the perfectly competitive firm will face price pi B. in the long-run, the perfectly competitive firm will face price p: C. in the long-run, the perfectly competitive firm will face price p D. it is impossible to determine the long-run price this firm will face based on pic. 3. which of the following is true: 10. The firm\'s long-tun profit will be zero if A. p-MR B. p-MC C. MC-MR D. p-AC 1. The firm produces a good that consumers perceive as identical to those produced by numerous other manufacturers. The estimated cost function is C(Q)-40+20 where 40 is the fixed cost this firm has already incurred. Suppose other firms in the market sell the product at a price of S20. Which of the following is true? A. this firm will produce Q-5 units and earn negative profits. B. this firm will produce Q 5 units and earn positive profits. C. this firm will produce Q 3.16 units and earn negative profits. D. this firm will produce Q3.16 units and earn positive profits.

Solution

9. In long run, a perfectly competitive firm produces at the minimum point on its long-run AC curve and a perfectly competitive firm maximizes profit by producing at the point where Price = MC. Therefore, this firm in long run will produce at the point where LRAC = LRMC. At that point, it will face price = P₂^e .

Answer- Option B

10. The firm\'s long-run profit will be zero if it is producing at the minimum point on AC i.e. if it\'s Price = AC.

Answer- Option D

11. The firm is in a perfectly competitive market where all the other firms produce an identical good at the market price = $20. A firm in perfect competition maximizes profit by producing at the point where P=MC.

For this firm, C = 40 + 2Q²

or, MC = d(C)/dQ = 4Q

therefore, the firm will produce at the point where 4Q = 20. The firm\'s profit maximizing output is Q= 20/4 = 5

The firm\'s total revenue at this quantity= P*Q = $ (20*5) = $100

and, Total cost = C = 40+2(5)² = 40+50 = $ 90

Therefore, Profit = TR - TC = $ ( 100-90) = $10. It means the firm is producing 5 units and earning a positive profit.

Answer - Option B