Question : Figure 11-15 57) Refer to Figure 11-15 to answer the following : 1244644

 

 

Figure 11-15

 

57) Refer to Figure 11-15 to answer the following questions.

a. What is the profit-maximizing output level?

b. What is the profit-maximizing price?

c. What is the average total cost at the profit-maximizing output level?

d. What area represents the firm’s profit?

e. At which output level are economies of scale exhausted?

f. Does this graph most likely represent the long run or the short run? Why?

Figure 11-16

 

58) Refer to Figure 11-16. Figure 11-16 depicts a monopolistically competitive barber shop. Use the diagram to answer the following questions.

a.Suppose the average variable cost of production is $15 when output equals 110 haircuts and $15.25 when output equals 140 haircuts. If the firm wants to maximize its profit or minimize its losses, how many haircuts will it produce and what price should it charge? Explain your answer.

b.Calculate the firm’s profit or loss.

c.What is likely to happen in this industry over time as it moves to its new long-run equilibrium?

d.Suppose the barber shop depicted in the diagram remains in the industry. Is this barber shop likely to produce this same quantity of haircuts as in part (a) in the long run?

 

59) Sparkle, one of many firms in the market for toothpaste, is in long-run equilibrium. Sparkle has a small market share and has been in business for a long time.

 

a.Identify the market structure in which Sparkle operates. Explain your answer.

b.What is Sparkle’s profit or loss? Explain your answer. If you cannot determine the profit or loss, explain what information is missing.

c.Draw a diagram showing Sparkle’s demand curve, marginal revenue curve, average total cost curve and marginal cost curve. Label your diagram.

 

60) The table below shows the demand and cost data facing “Velvet Touches,” a monopolistically competitive producer of velvet throw pillows.

 

Quantity

Price

Total Revenue

Marginal Revenue

Total Cost

Marginal Cost

1

$30

 

 

  $32

 

2

  28

 

 

    43

 

3

  26

 

 

    53

 

4

  24

 

 

    64

 

5

  22

 

 

    76

 

6

  20

 

 

    90

 

7

  18

 

 

  106

 

8

  16

 

 

  126

 

 

Use the data to answer the following questions.

a.Complete the Total Revenue (TR), Marginal Revenue (MR) and Marginal Cost (MC) columns above.

b.What are the profit-maximizing price and quantity for Velvet Touches?

c.Is the firm making a profit or a loss? How much is the profit or loss? Show your work.

d.Is this firm operating in the long run or in the short run? Explain your answer.

e.If the firm’s profit or loss is typical of all firms in the market for throw pillows, what is likely to happen in the future? Will there be more firms or will some existing firms leave the industry? Explain your answer.

f.What will happen to the typical firm’s profit or loss after all entry/exit adjustments?