# Essay about Costs and Market Price

1975 Words Apr 21st, 2011 8 Pages
Any typo or mistake is on me. Any questions, email me.

xgu@econ.rutgers.edu

Econ 102: Sec.07 Problem Set #6: Due on Tuesday, 26-April-2011 Note: 1. Do it LOL. Do it independently. Do it carefully. 2. Write your answer on the answer sheet attached (last page). I only collect the answer sheets on Tuesdays, before the class begins. So you can keep the questions. And if you cannot make Tuesday class, please send me your answers via email before Tuesday class ends. Use attachments, please. 3. Good Luck!

1. In a competitive market, the actions of any single buyer or seller will
a. have a negligible impact on the market price. b. have little effect on market equilibrium quantity but will affect market equilibrium price. c. affect
c. Mrs. Smith should continue to operate in both the short run and long run. d. Mrs. Smith should shut down in both the short run and long run.

11.

Which of the following expressions is correct for a competitive firm? a. Profit = (Quantity of output) x (Price - Average total cost) b. Marginal revenue = (Change in total revenue)/(Quantity of output) c. Average total cost = Total variable cost/Quantity of output d. Average revenue = (Marginal revenue) x (Quantity of output)

12. In a competitive market the price is \$8. A typical firm in the market has ATC = \$6, AVC
= \$5, and MC = \$8. How much economic profit is the firm earning in the short run?

Any typo or mistake is on me. Any questions, email me.

xgu@econ.rutgers.edu

a. b. c. d.

\$0 per unit \$1 per unit \$2 per unit \$3 per unit

Figure 14-1
Price

10 9 8 7 6 5 4 3 2 1

MC ATC AVC

P1 P2 P3 P4

1

2

3

4

5

6

7

8

Quantity

13.

Refer to Figure 14-1. If the market price is P1, in the short run, the perfectly competitive firm will earn a. positive economic profits. b. negative economic profits but will try to remain open. c. negative economic profits and will shut down. d. zero economic profits.

14.

Refer to Figure 14-1. If the market price is P2, in the short run, the perfectly competitive firm will earn a. positive economic profits. b. negative economic profits but will try to remain open. c. negative

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