# 135000 per day until its fixed costs end such as the

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\$135,000 per day until its fixed costs end (such as the expiration of a building lease). This firm’s shutdown price that is, the price below which it is optimal for the firm to shut down is ______ per shirt. Answer: 1. ABE 2. \$40, 0, 20, 10, 6, 15, smaller, 25, greater, marginal cost and marginal revenue, MC = P 3. 45000, profit, \$180,000 P Output TR FC VC Profit \$6 15,000 \$90,000 \$135,000 \$90,000 -\$135,000 \$12 30,000 \$360,000 \$135,000 \$225,000 \$0 \$18 45,000 \$810,000 \$135,000 \$450,000 \$225,000
4. Consider a perfectly competitive market for titanium. Assume that all firms in the industry are identical and have the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. Assume also that it does not matter how many firms are in the industry. The following diagram shows the market demand for titanium. First plot the initial short-run industry supply curve when there are 20 firms in the market. (Note: Ignore the portion of the supply curve that corresponds to prices at which there is no output, since this is the industry supply curve.) Next plot the short-run industry supply curve when there are 30 firms. Finally, plot the short-run industry supply curve when there are 40 firms. With 40 firms in this market, the short-run equilibrium price of titanium would be ___________ per pound. At that price, firms in this industry would ___________________ . Therefore, in the long run, firms would __________________ the titanium market. Because you know that perfectly competitive firms earn _____________ profit in the long run, you know the long-run equilibrium price must be __________ per pounth. From the graph, you can see that this means there will be ________________ firms operating in the titanium industry in long-run equilibrium.
Various cost function values for a perfectly competitive firm are given in the table below, where q denotes the firm’s output level. The prices of inputs used in production in this industry do not vary with the level of industry output. q SATC AVC SMC LAC LMC 0 --- --- \$20 --- \$29 1 \$64 \$14 \$8 \$24 \$20 2 \$34 \$9 \$2 \$20 \$12 3 \$23 \$7 \$2 \$16 \$7 4 \$19 \$6 \$8 \$14 \$3 5 \$18 \$8 \$20 \$11 \$1 6 \$19 \$11 \$38 \$10 \$2 7 \$24 \$17 \$62 \$9 \$4 8 \$30 \$24 \$92 \$8 \$8 9 \$39 \$34 \$128 \$9 \$14 10 \$50 \$45 \$170 \$10 \$23 11 \$63 \$59 \$218 \$11 \$33 12 \$78 \$74 \$272 \$14 \$45 1. Determine the short run profit maximizing output when P = \$19. 2. Determine the short run profit maximizing output when P = \$4. 3. Assume that all firms in this industry have cost functions identical to those of this firm. Determine and graph the long-run industry supply curve. 4. Suppose that a tax of \$10 per unit of output is imposed on all firms in this industry. What price will consumers pay for this good in long run equilibrium?
Lecture 18 Monopoly Questions: Why is MR < P for a monopolist? How do monopolies choose their P and Q? How do monopolies affect society’s well-being? Why people get discount for movie tickets on weekday mornings? Today’s schedule: 1. Definition of monopoly A monopoly is a firm that is the sole seller of a product without close substitutes . While a competitive firm is a price taker, a monopoly firm is a price maker.