1 / 4

Practice Free Response

Practice Free Response. Answer Key. a). QTY TC MC ATC AVC TVC. ATC. S. 1. B. $9. $9. $6. A. D. 2. D. 1. Q. Q. 2. 1. Profit. 1- Firm. Market. MC. Price. Price. B. MR 2 = D 2. ______________. AVC. = D. MR. A.

lalo
Download Presentation

Practice Free Response

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Practice Free Response Answer Key

  2. a) QTY TC MC ATC AVC TVC

  3. ATC S 1 B $9 $9 $6 A D 2 D 1 Q Q 2 1 Profit 1- Firm Market MC Price Price B MR2 = D2 ______________ AVC = D MR A .………….. $6 ----------------------- ------------------ AFC 6 0 0 5 Quantity (market) Quantity (firm) b) i) 5 units => set MR = MC ii) zero economic profit (P-ATC )* Qty d) i) 6 units set MR = MC ii) profit is $15 dollars e) i) Shutdown when price $1.75 because P < AVC. ii) Exit long run P < ATC f) i) Stay open if price is $2 or higher (min of AVC) ii) Exit in long run unless price is $6 or higher (min of ATC)

  4. 10) MP crosses AP at max (as MP falls, worker efficiency falls) 11) MC crosses both AVC & ATC at min 12) Yes, MC determines change in AVC & ATC 13) Diminishing marginal returns ensures that MP must eventually fall => when MP falls => MC must rise (leads to upward sloping MC curve as workers become less efficient)

More Related