Given the Following Data for a Typical Firm in a Competitive

question 56

Essay

Given the following data for a typical firm in a competitive industry, sketch the two short-run average total cost curves and the two marginal cost curves, and answer the following: (A) What is the long-run price and quantity produced for the typical firm in this industry? How many units of capital will the firm be using?
(B) Suppose the current market price of the output is $6. What level of capital and output is profit-maximizing? Explain.
(C) Suppose the price of the output increases to $10. What level of capital and output is profit-maximizing now?
(D) Will it make sense for the firm to expand even when the long-run equilibrium may be at a lower level of capital? On what does it depend?

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Definitions:

Impulsivity

A trait characterized by acting on a whim, displaying behavior characterized by little or no forethought, reflection, or consideration of the consequences.

Self-Control

The ability to regulate one's emotions, thoughts, and behaviors in the face of temptations and impulses.

Self-Regulation

The process of guiding and directing yourself to a desired state.

Agreeableness

How caring a person is for others and how the person gets along with other people; part of the Big Five personality traits.