Please solve questions 7 9 11 12 Question 7 of 17 Mapoat sa

Please solve questions 7, 9, 11, & 12.

Question 7 of 17 Mapoat sapling learning The graph to the below depicts the Marginal Cost (MC), Average Total Cost (ATC), and Marginal Revenue (MR) curves for a perfectly (or purely) competitive firm. What price should this firm charge to maximize profit? MC Number ATC MR-D 12 How many units should this firm produce to maximize profit? Number 10 12 18 Quantity

Solution

(7)

(a) A competitive firm equates price ( = MR = D) with MC. This happens where P = MC = $12

(b) When P = MC = 12, quantity = 12

(9)

(a) A competitive firm equates price ( = MR = D) with MC. This happens where P = MC = $3. When P = 3, quantity = 7

(b) Price charged = $3

(c) Profit = quantity x (Price - ATC) = 7 x $(3 - 1) = $14

(11)

(a) To earn economic profits, price must be kept above the minimum point of ATC.

That is, P > $600

(b) Shutdown happens when P < AVC, that is, Price falls below $400. So shutdown point = $400

(12)

(a) I don\'t have the interactive graphical tool as shown. But place the orange line as follows:

Supply curve is the portion of MC that is above minimum point of ATC. So, the upward portion of MC from minimum point of ATC is the supply curve (starting from P = 9)

(b) Minimum supply takes place when price is lowest (minimum point of ATC), at 9. When P = 9, Q = 18.

(c) In the long run, firms shut down if P < ATC. That is, if price is below $9.