Doggy Treats is selling dog treats in a purely competitive market. Its output is 800 treats, which it sells for $10 a treat. At the 800-treat level of output, the marginal cost is $11, the average variable cost is $9.00, and the average variable cost is
$8.00. Should the firm increase output, decrease output, or not produce? Why? How should the firm determine that optimal level of output?
What will be an ideal response?
The firm should produce because at the current level of output marginal revenue or price is greater than average variable cost. The firm also should decrease output because at the current level of output marginal revenue or price is less than marginal cost. At the current level of output, the firm is still making a profit because marginal revenue is greater than average total cost, but the firm would maximize its profit if it reduced output to the point where marginal revenue equals marginal cost.
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Suppose Phillips and Mathew are the only tenants in a building. The owner of the building is considering installing surveillance cameras in the building
The following table shows the amount that Phillips and Mathew are willing to pay for each additional camera: Number of Surveillance Cameras Phillips's Willingness to Pay Mathew's Willingness to Pay 1 $400 $300 2 $310 $200 3 $210 $110 4 $80 $30 If the cost of installing each surveillance camera is $320, how many cameras will the owner of the building install to maximize welfare?
Frozen Paws wants to prevent Happy Paws from entering the pet frozen treat market. If Frozen Paws expands its capacity, the expansion can lead to all of the following except which one?
A) increase Frozen Paws' profit-maximizing quantity B) decrease Frozen Paws' marginal cost C) increase Frozen Paws' profit-maximizing price D) decrease Happy Paws' profit from entering the market
According to the above table, if the marginal revenue product is $24, how many workers will the profit maximizing monopsonist hire?
A) 4 B) 5 C) 6 D) 7
Which of the following is a true measure of national output?
a. GDP at market price b. Nominal GDP c. GDP in current dollars d. GDP in constant dollars