Economics Review Help!
posted by Matt .
This is for a test that I'm studying for in Economics. I never did understand this stuff. Here's what I have to figure out. I've never been good at Economics, but I'm trying to get this stuff down for my final. Any help would be appreciated. Thanks in advance.
Question 73 of 100
The following table represents price, quantity (Q), total revenue (TR), and cost (TFC=total fixed cost, TVC=total variable cost, TC=total cost, MC=marginal cost, AC=average cost) for a price taker.
Answer the following questions:
- This firm will maximize profit where Q = _______, where marginal revenue and marginal cost are roughly equal.
- Draw the firm's demand curve. Then sketch the marginal cost curve. Drop a line from the intersection to the horizontal axis and label it with the - - Q value that maximizes profit. This profit is $_______?
- Now instead of a price of $5, suppose the price equals $0.75 (75 cents). Which columns of numbers in the table can be compared to the price to prove that the firm should shut down?
-What is the amount of the firm's loss if it shuts down?
I cant seem to view your table at the stated web site. However, your questions practically answer them selves.
1) Your table contents suggest you have a total revenue column. First construct a series of marginal revenue amounts as the change in total revenue caused by a change in Q. Maximum profit occurs when MC=MR.
2) You found the maximizing Q above. Do the algebra and find Total revenue and total cost. Profit=TR-TC.
3) A firm shuts down in the short run if revenue doesnt cover its variable costs. This occurs if price is below the lowest MC.
4) Under a shutdown, a firm's loss is its fixed cost.