Illustrate the sratc avc mc and mr curves for a

4. Illustrate the SRATC, AVC, MC, and MR curves for a perfectly competitive firm that is operating at a
loss. What is the output level that minimizes losses? Why is it more profitable to continue producing in the
short run rather than shut down?

5. Industry councils promote the consumption of particular types of farm products. These groups urge us
to “Drink Milk” or “Eat Apples.” Very little advertising is done by individual farmers. Using your
understanding of the perfectly competitive market, explain this advertising strategy.
6. Complete the following table and identify the profit-maximizing output.
a.
Total Marginal Marginal Total
Quantity Price Revenue Revenue Cost Profit
10 $12 $120 $12 $ 8 $25
11 12 ______ ______ 9 ______
12 12 ______ ______ 11 ______
13 12 ______ ______ 12 ______
14 12 ______ ______ 14 ______
b.What is true about marginal revenue and marginal costs when profit is maximized?
c. What would be the profit-maximizing level of output if price fell to $9?
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