Thomas Edison State College Profit Maximizing Firm Questions

Please answer the questions below, All questions must be included in your submission

1.At its current level of production, a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm’s marginal cost curve crosses the marginal revenue curve at an output level of 1000 units. What is the firm’s current profit? What is likely to occur in this market, and why?

2.Under what conditions should a firm shut down production in the short run? Under what conditions should a firm shut down in the long run? Explain the difference between the short- and long-run conditions.

3.Define and explain the relationship between total revenue, average revenue, and marginal revenue for a monopolist. What is monopoly profit? Should a monopolist produce quantities of product greater than that which would maximize profits?

4.In what ways can a government create a monopoly? Why might a government do this?

5.Explain the output effect and the price effect for an oligopoly. How does each influence the oligopolist’s production decision?

6.What is a natural monopoly? How does a natural monopoly lead to lower costs than would exist if there were more than one firm in an industry that is a natural monopoly?

7.Entry of firms in a monopolistically competitive industry is characterized by two external effects. What are these effects and how do they affect a monopolistically competitive firm? How are consumers and incumbent firms influenced by these externalities?

8.Does a monopolistic competitor produce more or less output as compared to an efficient level of production? Explain. What are the benefits and drawbacks of this? Should the government intervene to alter this?

9.In order to determine whether his time is being spent optimally, over the past year a commercial fisherman has recorded the information shown in table at the following link: Fisherman’s Table (attached Below). He has recorded the hours he has spent per day fishing and the quantity of fish caught. What is the marginal product of fish per hour spent?

The fisherman has a fixed cost of $200 per day and variable costs of $150 per hour (wages and fuel). Fill in the missing information in the following table: Table to Complete. (attached Below)

The fish sells for $100 a ton. How many hours per day should the fisherman work in order to earn a maximum profit on his day’s activity? And how much is that profit? PLEASE SHOW ALL YOUR CALCULATIONS

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