Question

wool 46 04 a. What are the fixed costs? What are the marginal costs? What are the average total costs? b. If the price of the firm's output is $14, how many scarves should the firm produce? How much profit would it cam? Draw a diagram indicating this firm's profit maximizing output level and its profits. (Note: you do not need to plot all the points for the cost curves, but you should be sure that the curves intersect at the appropriate quantities and costs. Also be sure to label the number of units the firm should produce.) c. Is the market at long-run equilibrium? If not, describe and illustrate the process by which it will adjust. 5. (20 points) The market for oranges is perfectly competitive, with an equilibrium price (P) and quantity (Q"). Describe, using words and diagrams, the effects of the following events on the price of oranges: a. The price of bananas rises. At the same time, there is a damaging freeze in orange groves, b. The government imposes a price ceiling on oranges. C. A study suggests that many workers in orange groves are undocumented immigrants. The U.S. government forces most of them to stop working and leave the country d. Orange-growing firms collude.

Answer 1

A)

Та МС АТС 26 ск 24 12 З ту јо 11:13 ч с 12 11:25 тво 1912 6 76 % /.46 7 99 18 /3.92

B) Firm Profit Maximizing quantity is where ,

P=MC

Given P=14 ,so MC is 14 at Q=5

Profit= (p-ATC)*q=(14-12)*5=10

ATC But Price line

C) Firms are making positive profit ,so they are in short run equilibrium.

In long run new firms will enter the market by attracted from positive Profit and increase market supply and thus lead to decrease in price and Profit goes to zero.