What conditions are necessary to determine if the purely competitive firm should produce in the short run? State the marginal revenue and marginal cost conditions and the total revenue and total cost conditions.
What quantity should the purely competitive firm produce to maximize profits? Analyze from a total revenue and total cost perspective and a marginal revenue and marginal cost perspective.
Under what conditions will a purely competitive firm realize an economic profit? Give a response from a marginal revenue and marginal cost perspective and from a total revenue and total cost perspective.
Why is the level of output at which marginal revenue equals marginal cost the profit-maximizing output?
Suppose a bridge for automobiles was constructed across a river and all the costs associated with its construction have been paid. The amount of traffic is such that there are no foreseeable problems of overcrowding in the use of the bridge. Assume, also, that the extra cost associated with traffic crossing the bridge is for all practical purposes equal to zero. What toll should be charged to achieve the most efficient use of the bridge?
Explain the marginal revenue and marginal cost approach to profit maximization and use it to describe profit, loss, and shut down situations for the purely competitive firm.
Tomato Farms is selling tomatoes in a purely competitive market. Its output is 5000 bushels, which sell for $15 a bushel. At this level of output, the marginal cost is $15 a bushel and average total cost is $14.50 a bushel. Should the firm increase output, decrease output, or not produce? Why?
Good Grapes is selling grapes in a purely competitive market. Its output is 5000 pounds, which it sells for $5 a pound. At the 5000-pound level of output, the average variable cost is $4.00, the marginal cost is $4.25, and the average total cost is $4.50 a pound. Should the firm increase output, decrease output, or not produce? Why? How should the firm determine the optimal level of output?
Doggy Treats is selling dog treats in a purely competitive market. Its output is 800 treats, which it sells for $10 a treat. At the 800-treat level of output, the marginal cost is $11, the average variable cost is $9.00, and the average variable cost is $8.00. Should the firm increase output, decrease output, or not produce? Why? How should the firm determine that optimal level of output?
Shazam, a maker of magic wands, is selling in a purely competitive market. Its output is 500 wands, which sell for $10 each. At this level of output, the marginal cost is $10 and the average variable cost is $12. Should the firm increase output, decrease output, or not produce? Why?