Chap_8_Solutions_Odd

Chap_8_Solutions_Odd - Chapter 8 Answers to Questions and...

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Chapter 8: Answers to Questions and Problems 1. a. 7 units. b. $28. c. $224, since $32 x 7 = $224. d. $98, since $14 x 7 = $98. e. $126 (the difference between total cost and variable cost). f. It is earning a loss of $28, since ($28 -$32) x 7 = - $28. g. - $126, since its loss will equal its fixed costs. h. Shut down. 2. 3. a. 7 units. b. $130. c. $140, since ($130 – 110) x 7 = $140. d. Demand will decrease over time as new firms enter the market. In the long- run, economic profits will shrink to zero. 4. 5. a. A perfectly competitive firm’s supply curve is its marginal cost curve above the minimum of its AVC curve. Here, 2 50 8 3 i i i MC q q = - + and 2 3 2 50 4 50 4 i i i i i i i q q q AVC q q q - + = = - + . Since MC and AVC are equal at the minimum point of AVC, set MC i = AVC i to get 2 2 50 8 3 50 4 i i i i q q q q - + = - + , or 2 i q = . Thus, AVC is minimized at an output of 2 units, and the corresponding AVC is ( 29 ( 29 2 50 4 2 2 46 i AVC = - + = . Thus the firm’s supply curve is described
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Chap_8_Solutions_Odd - Chapter 8 Answers to Questions and...

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