2.a. Consider a firm with the following productions and costs. Please measure the marginal cost of the 2nd unit (q = 2) of production. Show your work. (0.4 point) Total Product Total Cost q TC 0 $5 1 $12 2 $15 b. What are the two profit maximizing conditions (rules) or what are the two ways used to find the level of production "q" that maximizes profit? (0.2 point) c. Assume that a firm is losing money (making a negative economic profit) in the short run. Should this firm shut down in the short run, yes or no? Explain. (0.3 point)
Added by Valerie C.
Close
Step 1
To find the marginal cost of the 2nd unit of production, we need to calculate the change in total cost when producing the 2nd unit. Total Cost (TC) for q = 1 is $5. Total Cost (TC) for q = 2 is $12. Change in Total Cost (ΔTC) = TC(q=2) - TC(q=1) = $12 - $5 = Show more…
Show all steps
Your feedback will help us improve your experience
Rachel Gore and 101 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
A firm has a fixed production cost of $5000 and a constant marginal cost of production of $500 per unit produced. (a) What is the firm's total cost function? Average cost function? These functions, C(q) and AC(q) (or TC(q) and ATC(q)) describe total cost and average cost for any value of q. (b) If this firm wanted to minimize the average total cost, would it choose to be very large or very small? Explain.
Andrew D.
Consider a firm in each of the following three situations, and explain whether the firm will produce in the short run or shut down in the short run. Situation 1: Price: $10.00 Quantity: 1,000 Variable cost: $5,000 Fixed cost: $5,000 Marginal cost of 1,000th unit: $10.00 Situation 2: Price: $10.00 Quantity: 1,000 Variable cost: $5,000 Fixed cost: $6,000 Marginal cost of 1,000th unit: $10.00 Situation 3: Price: $10.00 Quantity: 1,000 Variable cost: $11,000 Fixed cost: $5,000 Marginal cost of 1,000th unit: $10.00 In situation 1, the firm should: A. shut down since the price is less than the average variable cost B. produce 1,000 units of output at a loss since the price is less than the average total cost C. produce 1,000 units of output and break even with a price of $10.00 D. produce 1,000 units of output and have an economic profit of $1.00 per unit.
Crystal W.
Suppose a firm's total revenues depend on the amount produced ( $q$ ) according to the function \[ R=70 q-q^{2} \] Total costs also depend on $q:$ \[ C=q^{2}+30 q+100 \] a. What level of output should the firm produce in order to maximize profits $(R-C)$ ? What will profits be? b. Show that the second-order conditions for a maximum are satisfied at the output level found in part (a). c. Does the solution calculated here obey the "marginal revenue equals marginal cost" rule? Explain.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD