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# hw5 - operation in the short run d if price falls below the...

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Homework 5 1. a. Quantity FC VC TC AFC AVC ATC MC 0 16 0 16 1 16 18 34 16 18 34 18 2 16 31 47 8 15.5 23.5 13 3 16 41 57 5.33 13.67 19 10 4 16 49 65 4 12.25 16.25 8 5 16 59 75 3.2 11.8 15 10 6 16 72 88 2.67 12 14.67 13 7 16 90 106 2.29 12.86 15.14 18 8 16 114 130 2 14.25 16.25 24 9 16 145 161 1.78 16.11 17.89 31 10 16 184 200 1.6 18.4 20 39 b. c. Average total cost and marginal cost are totally different. Average total cost tells the producer how much the average or typical unit of output costs to produce. Marginal cost, meanwhile, tells the producer how much one more unit of output costs to produce.

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2. a. Quantity TR TC Profit MR MC 0 0 1 -1 1 3 2 1 3 1 2 6 4 2 3 2 3 9 7 2 3 3 4 12 11 1 3 4 5 15 16 -1 3 5 b. optimal level of production: 3; profit is maximized when marginal revenue is no less than marginal cost. c. \$3 is not a long run market equilibrium price, because the market is profitable, price exceeds the minimum average total cost, or the breakeven price. 3. a. Q3 b. yes, total profit is given by the rectangle area MC-A-P3-P4 c. if price falls below the minimum average variable cost, or P1, the firm ceases
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Unformatted text preview: operation in the short run. d. if price falls below the minimum average total cost, or P2, competitive firms will exit the market. e. Q2, P2 4. a. b. she can purchase 8 bagels. c. slop of budget constrain is -2; slop of the indifference curve at the optimum is -2. The budget line represents the boundary between the set of affordable consumption bundles and unaffordable ones. It is a straight line. The indifference curve is a contour line along which total utility is constant. We can use the slope of budget line and the slope of indifference curve to find the optimal consumption bundle. At the optimal consumption bundle, the marginal rate of substitution between any two goods is equal to the ratio of their prices. Thus, the slope of budget line equals to the slope of the indifference curve at the optimum....
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hw5 - operation in the short run d if price falls below the...

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