Economics 1010a1 Lecture Notes - Lecture 1: Marginal Revenue Productivity Theory Of Wages, Perfect Competition, Allocative Efficiency

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nicolk

16 Dec 2021

School

Harvard University

Department

Economics

Course

Economics 1010a1

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Task 7 and lgs economics and business. The task is about: how do companies make decisions: long-run equilibrium: c(q)=5000+50y^2; p=750, mc=change in total costs / change in output mc=c"(q)=100y. In long-run equilibrium the marginal costs (mc) are mc=p mc=p=750. 750=100y y=7. 5 long-run equilibrium quantity: average cost (ac): c(q)/q=5000/y+50y ac(7. 5)=1041. 7, average variable costs (avc)=vc/q=50y avc(7. 5)=375, total costs (tc): tc(7. 5)=5375, find the minimum of the average cost (ac) function: Answer: the firm will not shut down because the average variable costs (avc) are always higher than the marginal costs (mc) C(y)=5000+50y^2 c(7. 5)=7812. 5: revenue: price*quantity r=750*7. 5=5625, profit: revenue-costs p=5625-7812. 5= -2187. 5. Answer: the final profit is negative and by that it is obviously smaller than the loss when producing nothing (because of fixed costs) so the firm cannot exit in short-term. What are the different cost curves? (apply this to the task as an example) A cost curve is a graph of the costs of production as a function of total quantity produced.

Related Questions

Questions 23 - 27 are based upon the following table, production costs for a perfectly competitive firm. Output Fixed Variable Cost Cost Total Cost Average Fixed Cost Average Variable Average Total Cost Marginal Cost Cost 80 80 70 110 160 220 295 400 540 700 150 190 240 300 375 480 620 780 26. At the long run equilibrium, this firm will produce a. 0. b. 4. os

1. ExpIain with the heIp of graphs h0w a flrm mlnlmlzes costs in the long run

2. Draw a graph 0f a market for a flrm ln a perfectIy competltive lndustry. lndicate the short run profit maximizing quantity and the profits for the firm. Explain with equations.

3a) ExpIain what the deadwelght Ioss of a non-discriminating monopoIy is with words and graphs.

B) Why is the Iong run equilibrium under perfect competition more effecient than monopoIy?

Quantity	Fixed Cost	Variable Cost	Total Cost	Marginal Cost	Average Fixed Cost	Average Variable Cost	Average Total Cost
0	$30	$0	$30	0	0	0	0
1	$30	$30	$60	30	30	30	69
2	$30	$48	$78	18	15	24	39
3	$30	$57	$87	9	10	19	29
4	$30	$64	$94	7	7.5	16	23.5
5	$30	$85	$115	21	6	17	23

A) At what point will the MarginaI Cost Curve lntersect the ATC?

B) At what point will the MarginaI Cost Curve lntersect the AVC?

Consider a market with many firms that have different cost structures.

Unless shutdown or exit is optimal, every firm expands production until ___________.

marginal product is maximized.

B. marginal revenue, marginal cost, and price are all equal

(MR = MC = P)

C. marginal revenue is equal to the minimum of the short-run average total cost.

D. marginal cost is minimized.

To construct the supply curve in a market with many firms with different cost structures, the ___________.

individual supply curves for each firm are added together.

individual average variable cost curves are added together.

minimums of theâ firms' marginal cost curves are linked together.

minimums of theâ firms' long-run average total cost curves are linked together.

The equilibrium price is the ___________.

âlong-run average total cost of the last entrant into the market.

the average marginal cost of the firms.

the long-run average total cost of the first entrant into the market.

minimum of the average variable cost of the smallest firm in the market.

In terms of economic profits, early market entrants earn

(negative

zero

positive)

economic profits and the last entrant earns

(negative

zero

positive)

economic profits.

A perfectly competitive firm will choose to shut down when the (price (marginal revenue)/ average total cost) intersects the marginal cost curve below the ( total cost curve average variable cost curve ).

Therefore, the short-run supply curve for a perfectly competitive firm is represented by __________.

A. the portion of the average variable cost curve below marginal cost. B. the portion of the average variable cost curve above marginal cost. C. the portion of the marginal cost curve above the average total cost. D. the portion of the marginal cost curve above average variable cost.

In the long run, the supply curve for a perfectly competitive firm is represented by __________.

A. the portion of the marginal cost curve above the average total cost. B. the portion of the marginal cost curve above average variable cost. C. the portion of the average variable cost curve below marginal cost. D. the portion of the average variable cost curve above marginal cost.

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Economics 1010a1 Lecture Notes - Lecture 1: Marginal Revenue Productivity Theory Of Wages, Perfect Competition, Allocative Efficiency

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