Chapter 1. eFigure 8.4

eFigure
Isoquants
true
true
You must read each slide, and complete any questions on the slide, in sequence.
E-Figure Title

Question 1.1

0vngAGlWlZyoKEK839bm3BN9133zxGpOQfNesbhROvaAkB24V2skp+YGhWNVRqBTuVKE2e5vCYQLZLokI9kZpLeTcmy22nZqUrGTe5gF9mzUupmSU+XkxYy4VPUCTPMQ2JBmOvkW/rCecWESRvuZRYn95XaU8Uh6eZxeZ7beMExNoXJsrkQdjJcDbPu3qe8o6ob3oBHGUVKXyrmTcmd2+FerfUGvT4z71KHEe1lz/Uyn4Fhyzv6ONYqbF3LMMl783mVMx05fgsZFObgzM7CFCEltNr0yvZeAxLdM04E4mUvnopE/U4vOQmM1G4i/5n8QLEBCQOqx1K+ypclBf2eoKngKFDv/1HyJOrgdkVDOl4qhs0OP
true
100
Correct! To maximize its profit the firm will produce where price is equal to marginal cost. This is how the firm determines its profit-maximizing quantity. At this point, we know that P =MR and since P = MC, it follows that MR = MC. Finally, by examining the graph we see that the ATC curve at Q* is below the MC curve. Accordingly, P > ATC since P = MC. In this case, all of the statements (a) through (c) are true, though it is important to note that these conditions may not always hold at the profit-maximizing quantity.
Incorrect. To maximize its profit the firm will produce where price is equal to marginal cost. This is how the firm determines its profit-maximizing quantity. At this point, we know that P =MR and since P = MC, it follows that MR = MC. Finally, by examining the graph we see that the ATC curve at Q* is below the MC curve. Accordingly, P > ATC since P = MC. In this case, all of the statements (a) through (c) are true, though it is important to note that these conditions may not always hold at the profit-maximizing quantity.

Question 1.2

kkt6DQ/7C9ysV680yYQqIcyCuTflkxyogxIwgR6XSBhJzuh5JuC0V2S04TJjEoPjeV8+9pH69kGo4GS0As/sZ89SyPrftSftjWkk838wAdGMubTR6pgkRvZU+4/Tad+J9vBNUwdDh3y3adbYhTVljahtu4n2pF5NZ6MmSf4FCGftxP4QEhW38tBDDSzhfK+VWigmQ6mBBiOfaj1lu5ASaJKMuI1XCIwgqph8lvx/Wz3jr6LPo0tjaBHDqqD7x01eLWr+XGtH70kvH68Ds3+uMT6jl9I8CKaHGVURqfoRefs237pxfnl5dFdyvMN56Oy75lw9vbqm0kdz77/JvyyJ3OrP3GoICxrQraH6Om+dXwZ0dKkNosGTGoh+dBZu91+R3e10iCvi1BdbFTSHocqcFuoXcggDq2Cd
100
Correct! Since the green rectangle is larger than the red rectangle, total revenue exceeds total cost. That is, the firm is taking in more in revenue than it is required to spend to cover its costs. Accordingly, profit is positive. Increasing or decreasing profit would require a change in equilibrium, a move from one price and quantity combination to another. In this case we are solely examining profit at the profit-maximizing quantity and we have established that it is positive.
Incorrect. Since the green rectangle is larger than the red rectangle, total revenue exceeds total cost. That is, the firm is taking in more in revenue than it is required to spend to cover its costs. Accordingly, profit is positive. Increasing or decreasing profit would require a change in equilibrium, a move from one price and quantity combination to another. In this case we are solely examining profit at the profit-maximizing quantity and we have established that it is positive.

Question 1.3

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
100
Correct! If a firm is earning negative profit we know that its total revenues are less than its total cost. This means that ATC > P at Q*, the profit-maximizing quantity. Since price is equal to marginal revenue, it is impossible for (a) to hold true. Moreover, it follows that ATC > MR at Q*. Accordingly (b) is the correct answer.
Incorrect! If a firm is earning negative profit we know that its total revenues are less than its total cost. This means that ATC > P at Q*, the profit-maximizing quantity. Since price is equal to marginal revenue, it is impossible for (a) to hold true. Moreover, it follows that ATC > MR at Q*. Accordingly (b) is the correct answer.