Reference no: EM131478713
Assignment
1. Consider the cost curves for a price-taking firm in the following figure:
![1659_Price-Taking_Graph.jpg](https://secure.expertsmind.com/CMSImages/1659_Price-Taking_Graph.jpg)
a. When price is $12 per unit of output, the firm maximizes profit by producing __________ units.
b. Since average total cost = $___________ for this output, total cost is $____________.
c. The firm makes an economic profit (loss) of $____________________.
d. Price falls to $8. The firm now maximizes profit by producing ______ units.
e. At this output level, total revenue = $__________ and total cost = $____________. Therefore the firm earns a profit (loss) of $____________.
f. Price falls to $6. The firm now maximizes profit by producing _____________ units.
g. At this output level, average total cost is $_________ and total cost is $_____________. Total revenue = $____________ and the firm makes a loss of $________________.
h. Even though the firm makes a loss, it does not shut down because total variable cost is $____________, which leaves $_________ of total revenue to apply toward fixed costs.
i. If price falls below $_____________, the firm shuts down.
2. Consider a monopoly that faces the demand and cost curves in the figure below. The firm operates in the short run using a plant designed to produce 850 units optimally.
![1087_Demand and Cost Curves.jpg](https://secure.expertsmind.com/CMSImages/1087_Demand%20and%20Cost%20Curves.jpg)
Please use SMC for Marginal cost curve. SMC represents short run marginal cost curve.
a. In the short run, the manager maximizes profit (or minimizes loss) by producing __________ units.
b. The monopolist charges $_________ per unit for its output.
c. Monopoly profit is $___________.