Question

Question 49 1 pts Dollars per unit MC $40 36 ATC 32 28 24 20 16 D MR = AR ン/AVC 12 4 100 150 200 250 Quantity This diagram most likely represents what market structure? could represent all excent a perfect.competition AA itEN i

Answer 1

1. The demand curve is flat and it is equal to the marginal / average revenue, thus this industry is most likely represents perfect competition.

2. In case of perfect competition the firm maximizes profit at the point where MC = P. As we can see from the graph the point where marginal cost intersects the demand curve the average total cost is less than the price. Refer graph where MC = D price is $ 28 and quantity is 200 units at this quantity only ATC = $ 22. Thus the firm is maximizing economic profit.

3. Profit = Total Revenue - Total Cost

Profit = PQ - Q×ATC

Profit = 28 × 200 - 200×22

Profit = 5600 - 4400

Profit = $ 1,200

First option is correct. Profit of $ 1,200

4. In the given diagram the demand curve is downward sloping and the marginal revenue curve is in the shape of a wedge with the demand curve.

$30 ATC 24 22 20 AVC 10 MR Q 0 50 100 150 200 117 This diagram most likely represents what market structure could represent all except a. perfect competition

Hence, it represents all market structure except perfect competition.

5. The firm is maximizing profit as the firm is selling at a price that is greater than it's Average Total Cost. Hence it is earning a normal profit.

6. Profit = 24×117 - 20×117 = 2,808 - 2340

Profit = $ 468

Profit of $ 468.

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