Chapter 8.

8.1 Screen 1 of 1

Question 15

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You must read each slide, and complete any questions on the slide, in sequence.

Question 8.1

ooPF5zdPYJX1T0weqN+YMGgyJtoEtDFmNZd5p6MTnw+QgE9VLrdUW4YIW+Hjt9ivnFo22PY5i5LQIdDnf7XUD/lxgTHYKdruv2xTwNoEJu8BwZf38tveYaOm4P2PNIA9ruZnxi7Sdc/ktQT5lNa0jPjIf7/HRYPyN5Yq5ostEf3dwHyKuc4eg+tkJ4FbENJx3+a/FZFgzrqO56uZ18GonTUgYzAplRhmHXveuX/Q+tUowHetnQN6tJfV4ruVeSS5JLX5ZbQCu7jMpmfGfbcoIIZTL69b+oGzFO3OHjK9L6O3E0S8Kd6JSXcbI3i9k9HrmLPjemfpqBBqAhvqBbTdNNKZk4WC2VVE8NpnP7Ff3Vi768TG+W45b1Tz93I=

Correct. The output at which any firm maximizes profit is where MR = MC. At this point, marginal revenue equals marginal cost, so profit cannot be increased by changing output.

Incorrect. The output at which any firm maximizes profit is where MR = MC. If output is less than this amount, profit will be increased by increasing output, so a profit-maximizing firm will produce more.

Question 8.2

B. For this firm in a perfectly competitive market, profit is maximized where Price = $24 and output = 28. At the profit-maximizing output, total revenue is $+Klj7Q7EXL0=.

At the profit-maximizing output, total cost is $6iaqO0RNNxk=.

Total revenue equals Price × Output. At the profit-maximizing output, total revenue equals $24 × 28 = $672. Total cost equals ATC x Output. At the profit-maximizing output, total cost equals $18 × 28 = $504.

Question 8.3

C. If the firm maximizes profit, it earns $0e+pc+rFeT8= in profit.

Profit = Total Revenue minus Total Cost. If revenue = $672 and Total Cost = $504, then profit = $672 – $504 = $168. (Alternatively, using the formula Profit = (P – ATC) × Q gives ($24 – 18) × 28 = $6 × 28 = $168.)

Profit = Total Revenue minus Total Cost. If Total Revenue = $672 and Total Cost = $504, then profit = $672 – $504 = $168. Alternatively, using the formula Profit = (P – ATC) × Q gives ($24 – 18) × 28 = $6 × 28 = $168.

Question

D. In the long run, market demand will likely l7n92339ruifefugWU6JQcqJqmcIdkv0qJ03ywo1KdudMyrx and market supply will likely I+4NKgpUmu4mYMH3pVTiI+GPPapcp3vOmdYmYCZDrPEvB3rJ

The presence of profits attracts new entrants into this perfectly competitive market. This shifts the market supply curve to the right. Demand does not change but there is a movement along the market demand curve.

Question

E. In the long run, the market price will f+xqNnPBZh0lG2uzHYPb2PPhXBTjbONOzse5eNnGCiT6wAUw

A rightward shift in the market supply curve results in a lower equilibrium price, all else equal.