Give a scenario of a perfectly competitive firm finding the profit-maximizing level of output over a several-year period.
What will be an ideal response?
but should show a thorough understanding of how a perfectly competitive firm finds the profit-maximizing level of output. For example, Hernandez Farms has entered the cotton business. It takes a while to get the first crop, so the first year shows a loss because total cost exceeds revenue, which is zero. Next year, the marginal revenue from the quantity produced exceeds the marginal cost enough to make up for last year’s loss and add a slight profit. In the following two years, the firm’s profit continues to increase as output increases because marginal revenue continues to exceed marginal cost. However, this difference is less with each succeeding year. Finally, in the fifth year, the firm’s marginal revenue equals its marginal cost. If the firm increases its cotton production more, it will start to lose profits. So in the fifth year, the firm has reached the profit-maximizing level of output.
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Henry Bessemer is most recognized for
a. the invention of air brakes for trains. b. his role as an early union leader. c. invention of a steel manufacturing process. d. the development of refrigerated train cars.
The GDP deflator does not differ from the CPI in its measurement of inflation in that it:
A. measures the price changes of all goods, not just those in a typical consumer's basket. B. uses the total quantities that are produced, not the ratio of what a typical consumer might consume. C. does not include imports, which may have a real effect on the typical consumer's cost of living. D. is the most widely used measure of price level changes for goods and services for consumers.
According to international trade theory, a country should: a. import goods in which it has an absolute advantage
b. specialize in the production of the good in which it has an absolute disadvantage. c. export goods when it has either a comparative or absolute disadvantage in producing them. d. specialize in the production of the good in which they have a comparative advantage.
Refer to the following table which gives the demand and cost data for a price-setting firm: What is the profit-maximizing price?
A. $18 B. $19 C. $16 D. $17 E. $15