ECO108 HW8

# ECO108 HW8 - should also include the part where the firm...

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ECO 108 Fall 2010 Bo He Name: __________________________ ID: __________________ Homework 8 Due Monday Nov 8th, at the beginning of LECTURE 1. A price-taking firm has its MC, AC, and AVC as those in the following graph. a. If the market price is \$10, estimate the firm’s optimal level of output. b. Draw in the diagram the profit box representing the maximum profit the firm can earn when price is \$10. c. Estimate the firm’s maximum profit when the market price is \$10. d. Estimate the range of price under which the firm’s optimal level of output is positive and its maximum profit is negative. e. Estimate the range of price under which the firm will choose to shut down.

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f. Draw in the diagram the short-run supply curve for this price-taking firm. You
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Unformatted text preview: should also include the part where the firm chooses to shut down. 2. A NPT firm has its TR as below and suppose TC=2000+4*X. (Show appropriate graphs!) A. How much profit will the firm make if it shuts down? B. If the firm operates at the output level X=400, how much would you expect the firm to spend on capital (fixed cost), and how much on labor (variable cost)? C. Estimate the range of output where the profit is positive and TR is increasing faster than TC is . D. Estimate the firms optimal level of output and its maximum profit. E. Find out the price the firm should charge at its optimal level of output....
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## This note was uploaded on 10/20/2011 for the course ECO 108 taught by Professor Wolman during the Spring '08 term at SUNY Stony Brook.

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ECO108 HW8 - should also include the part where the firm...

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