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Economists normally assume that the goal of a firm is to. (i) make profit as large as possible even if it means reducing output.
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Use the following information to answer questions 8 through 11.
Tony is a wheat farmer, but he also spends part of his day teaching guitar lessons. Due to the popularity of his local country western band, Farmer Tony has more students requesting lessons than he has time for if he is to also maintain his farming business. Farmer Tony charges $25 an hour for his guitar lessons. One spring day, he spends 10 hours in his fields planting $130 worth of seeds on his farm. He expects that the seeds he planted will yield $300 worth of wheat.
The figure below depicts a total cost function for a firm that produces cookies. Use the figure to answer questions 14 through 17.
Note: On the above diagram, change the vertical-axis labels from MC1 to P1, MC2 to P2, etc.
c. losses because P2 < ATC at output level Q1. d. zero profits.
The figure below depicts the cost structure of a profit-maximizing firm in a competitive market. Use the figure to answer questions 29 and 30.
c. will be earning both economic and accounting profits. d. should raise the price of its product.
Refer to the following information to answer Questions 34 through 37.
Assume a certain firm is producing 1,000 units of output (so Q = 1,000). At Q = 1,000, the firm’s marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
Use the figures below to answer questions 39 and 40