Answer to Question #127420 in Microeconomics for LEXCY SISIE

Question

2.1) If the market price is $20, then this firm will maximize profits by producing ________ units of output. (1M)
2.2) If the market price is $84, then this firm will maximize profits by producing ________ unit(s) of output and its profits will be ________. (1M)
2.3) If the market price is $84, then in the long run the firm will _________. (1M)
2.4) If the market price is $34, then in the long run the firm will _________. (1M)
2.5) If the market price is $34, then in the short run the firm will __________. (1M)
2.6) If the market price is $30, then this firm will maximize profits by producing ________ units of output. (1M)
2.7) The shutdown point price for this firm is _______. (1M)
2.8) The lowest output this firm would produce before shutting down is ________ units. (1M)

Answer 1

lets assume we are dealing with perfect competition:

2.1) profit maximization P=MC,

to get the output price, draw a line horizontal from price $30 to meet the curve, so output = $25

2.2) market price = $84, so output = 84*35 = $2,940

2.3) the firm should in the long run expand its operations since output would be great

2.4)the firm should increase its operations

2.5) if price = $30, output = 35

2.7) the shutdown price is equal to minimum output =$15

2.8) the lowest output before shut down = $15