Current level of Output - Essay Prowess
Do You Have an online Class? Email us [email protected]

# Current level of Output

ECON 1150 Suppose your boss comes to you with the following information – at the current level of Output, Q (Q = 210), Marginal Cost, MC = \$8.50, Average Variable Cost, AVC = \$4.00, and Average Total Cost, ATC = \$6.25. – Marginal Cost, MC curve along with the Average Variable Cost, AVC curve, and Average Total Cost, ATC -currently operating (1) at its Profit Maximizing position – why or why not? (2) if not, would the firm want to increase or decrease output to arrive at its Profit Maximizing position? -Marginal Revenue, MR
ECON 1150 Suppose your boss comes to you with the following information – at the current level of Output, Q (Q = 210), Marginal Cost, MC = \$8.50, Average Variable Cost, AVC = \$4.00, and Average Total Cost, ATC = \$6.25. i. Given the information given to you by your boss, she wants you to draw a graph approximating what the entire Marginal Cost, MC curve along with the Average Variable Cost, AVC curve, and Average Total Cost, ATC curve would look like showing all the appropriate relationship(s) among these three curves. ii. If the Market Equilibrium Price = \$5.50, explain carefully if the firm is currently operating (1) at its Profit Maximizing position – why or why not? (2) if not, would the firm want to increase or decrease output to arrive at its Profit Maximizing position? iii. What is the Marginal Revenue, MR for this firm? Explain carefully why this is the case. iv. At the firm’s Profit Maximizing position, is the firm operating at a positive economic profit, a negative economic profit, or at a zero economic profit? Why is this the case? v. At the firm’s current level of economic profit (as determined in part iii) what would be the behaviour in the MARKET as a whole – assuming all other firms are identical to this firm and have “perfect information” that the future will be the same: market entry, market exit, or neither? Why or why not? vi. If the Market Behaviour is as you explain in part iv above, what would be the profit position of this, and all other firms, at the point when the market re-establishes an equilibrium position AND how will the market’s equilibrium price have changed? Increased, decreased, or remained the same? Why? vii. Using a Graph of both the INDUSTRY and the individual representative FIRM, illustrate the changes to the INDUSTRY as explained earlier AND the final impact on the PROFITABILITY of the representative FIRM at the final EQUILIBRIUM position.