Ch.8 HW - Anthony Marsala Professor Woodbury EC251H Sec 2...

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Anthony Marsala Professor Woodbury EC251H Sec. 2 Ch. 8 Homework Pg. 264 #4, 6, 10, 16, 20, 24, 25, 28, 38, 40 4. Yes, a firm should continue to produce as long as its marginal profit exceeds its average variable cost because it must still cover its fixed costs even if output is zero. So as long as marginal profit exceeds variable costs at least some of the fixed costs will be covered by profits. Therefore, the firm is better off continuing to produce even if it is making a negative economic profit. 6. The profit maximizing output is always the greatest output at which the marginal cost line intersects the market price line. For example consider the two intersects to be q1 and q2. At q1 + 1 the market price still exceeds marginal cost so it makes sense to produce more than q1. However, at q2 + 1, the marginal cost exceeds the market price. Therefore, profits are maximized at the point q2. 10. In regards to the first claim, Mercedes-Benz of San Francisco may indeed have lower overhead because its land could already be paid for in full, which would substantially
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This note was uploaded on 10/04/2011 for the course EC 251h taught by Professor Woodbury during the Fall '10 term at Michigan State University.

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Ch.8 HW - Anthony Marsala Professor Woodbury EC251H Sec 2...

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