5. The following figure shows long-run average and marginal cost curves for a competitive firm. The...

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5. The following figure shows long-run average and marginal cost curves for a competitive firm. The price of the product is $40. Price and cost 6. The market supply curve? c. Market price? d. Market output? e. The firm's output? f. The firm's profit? What will happen in the long run? 40 30 10 0 T LMC LAC 2,000 4,000 6,000 8,000 10,000 Quantity D = MR = P a. How much will the firm produce? What will be its economic profit? b. When the industry attains long-run competitive equilibrium, what will be the price and the firm's output? What will be the firm's economic profit? 6. Suppose that a competitive industry is in long-run competitive equilibrium. Then the price of a substitute good (in consumption) decreases. What will happen in the short run to a. The market demand curve? 7. The following graph shows demand, MR, and cost curves for a monopoly in the short run: Price, marginal revenue, and cost (dollars) 12 11 10 a 40 2 1 0 SMC ATC AVC 10 20 30 40 50 60 70 80 90 100 110 120 Output MR a. Profit is maximized at a price of S b. The profit-maximizing level of output is c. At the optimal level of output, total revenue is S , and profit is S total cost is S d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (i.e., P-ATC) be larger or smaller than when price is set at the optimal level in part c? (Note: Average total cost is $8.75 when 20 units are produced.) Using marginal analysis, explain why this happens. 8. Explain why the manager of a profit-maximizing monopoly always produces and sells on the elastic portion of the demand curve. If costs are 0, what output will the manager produce? Explain. 5. The following figure shows long-run average and marginal cost curves for a competitive firm. The price of the product is $40. Price and cost 6. The market supply curve? c. Market price? d. Market output? e. The firm's output? f. The firm's profit? What will happen in the long run? 40 30 10 0 T LMC LAC 2,000 4,000 6,000 8,000 10,000 Quantity D = MR = P a. How much will the firm produce? What will be its economic profit? b. When the industry attains long-run competitive equilibrium, what will be the price and the firm's output? What will be the firm's economic profit? 6. Suppose that a competitive industry is in long-run competitive equilibrium. Then the price of a substitute good (in consumption) decreases. What will happen in the short run to a. The market demand curve? 7. The following graph shows demand, MR, and cost curves for a monopoly in the short run: Price, marginal revenue, and cost (dollars) 12 11 10 a 40 2 1 0 SMC ATC AVC 10 20 30 40 50 60 70 80 90 100 110 120 Output MR a. Profit is maximized at a price of S b. The profit-maximizing level of output is c. At the optimal level of output, total revenue is S , and profit is S total cost is S d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (i.e., P-ATC) be larger or smaller than when price is set at the optimal level in part c? (Note: Average total cost is $8.75 when 20 units are produced.) Using marginal analysis, explain why this happens. 8. Explain why the manager of a profit-maximizing monopoly always produces and sells on the elastic portion of the demand curve. If costs are 0, what output will the manager produce? Explain.

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When the firm uses the formula PMC the output Q equals 8000 units at an average cost of 25 Earn... View the full answer