ECO 101 Saudi Electronic University Microeconomics questions

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  • Use Times New Roman font 12 for all your answers.

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Problem Solving

Use the graph below of a perfectly competitive firm’s cost functions to answer the following set of questions

1) In the short run, what is the fixed cost for this firm? Explain your answer fully.(5 marks)
2) Find the break-even price and the shutdown price. (4 marks)
3) Should the firm operate if the market price was equal to $2? Why? (4 marks)
4) Suppose the market price of the good in the short-run is $12 per unit.
a. Does the firm maximize its profit by producing 50 units? Why? (2 marks)
b. If no, should the firm increase or decrease its quantity produced? (2 marks)
c. Which quantity maximizes the firm’s profit, given the market price. Explain your answer fully. (3 marks)
5) Given the breakeven price, do you think that the firm is earning a positive or a negative profit when the market price is equal to $12? Why? (2 marks)
6) Calculate the profit (loss) earned by the firm. (3 marks)
7) What do you think will happen on this market in the long-run? Will some existing firms exit the market, or, on the opposite, new firms will enter the market? When does the market reach a long-run equilibrium? (5 marks)

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Assignment No. 3 Course: Microeconomics (Econ-101) Academic Year:1439-1440 H Student name: Semester: 2nd Student grade: / 30 CRN: Level of the marks: Student ID: Instructions: ➢ This Assignment must be submitted on Blackboard (WORD format only) via the allocated folder. ➢ Email submission will not be accepted. ➢ You are advised to make your work clear and well-presented; marks may be reduced for poor presentation. This includes filling your information on the cover page. ➢ Assignment will be evaluated through BB Safe Assign tool. ➢ Late submission will result in ZERO marks being awarded. ➢ The work should be your own, copying from students or other resources will result in ZERO marks. ➢ Use Times New Roman font 12 for all your answers. Problem Solving Use the graph below of a perfectly competitive firm’s cost functions to answer the following set of questions 1) 2) 3) 4) In the short run, what is the fixed cost for this firm? Explain your answer fully.(5 marks) Find the break-even price and the shutdown price. (4 marks) Should the firm operate if the market price was equal to $2? Why? (4 marks) Suppose the market price of the good in the short-run is $12 per unit. a. Does the firm maximize its profit by producing 50 units? Why? (2 marks) b. If no, should the firm increase or decrease its quantity produced? (2 marks) c. Which quantity maximizes the firm’s profit, given the market price. Explain your answer fully. (3 marks) 5) Given the breakeven price, do you think that the firm is earning a positive or a negative profit when the market price is equal to $12? Why? (2 marks) 6) Calculate the profit (loss) earned by the firm. (3 marks) 7) What do you think will happen on this market in the long-run? Will some existing firms exit the market, or, on the opposite, new firms will enter the market? When does the market reach a long-run equilibrium? (5 marks) Answer:- ...
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Tutor Answer

John_Best
School: New York University

Attached.

Running Head: MICROECONOMICS

1

Microeconomics
Name
Course
Tutor
Date of Submission

MICROECONOMICS

1. Fixed cost is the cost that does not vary depending on quantity.
Average fixed cost equals the average total cost less the average variable cost (Starkie,
2016).
Where the quantity is 50 from the graph, the ATC is 8, and the AVC is roughly 4.
Therefore the AFC is (8 – 4) which is 4.
Fixed cost is eq...

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Anonymous
awesome work thanks

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