Problem_Set_8_Firms'_Supply_Curves

Problem_Set_8_Firms'_Supply_Curves - 199 Problems on...

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Unformatted text preview: 199 Problems on Firms’ Supply Curves and Market Supply Curves. Problem 8.1. What is a firm’s shutdown point? Problem 8.2. Suppose a firm faces a price of p = $8 per unit for its product. The firm’s marginal and average variable costs are displayed in Table 8.4. The firm is stuck with 10 units of capital. The rental rate is r = $3 per capital unit. Table 8.4: Output Level Marginal Cost Average Variable Cost (output units) ($/output unit) ($/output unit) – – 1 12 12 2 9 10 · 50 3 6 9 4 5 8 5 4 7 · 20 6 5 6 · 83 7 6 6 · 71 8 8 6 · 88 9 10 7 · 22 10 13 7 · 80 11 16 8 · 67 12 20 9 · 50 13 25 10 · 69 14 32 12 · 21 (i) What is the size of the firm’s fixed input cost? (ii) What is the value of the firm’s shutdown point? (Remember, the firm’s shutdown point has two coordinates – its height on the price axis and how far it is along the horizontal output axis.) (iii) At what price levels p for its output does the firm increase its loss by producing? (iv) Complete Table 8.5 by entering the firm’s profit-maximizing output level for each price level p . (v) What is the firm’s supply “curve”? How is it related to Table 8.5? 200 CHAPTER 8. FIRMS’ SUPPLY CURVES Table 8.5: Price, p $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 Output, q Problem 8.3. This is a problem that is very similar to Problem 8.2. Its purpose is to reinforce for you what has been learned in Problem 8.2. A firm faces a price of p = $10 per unit for its product. The firm’s marginal production costs are displayed= $10 per unit for its product....
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This note was uploaded on 03/01/2011 for the course ECO 182 taught by Professor Morgan during the Spring '08 term at SUNY Buffalo.

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Problem_Set_8_Firms'_Supply_Curves - 199 Problems on...

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