Refer to Figure 13-17. What is the productively efficient output for the firm represented in the ...

Answer 1

harder; more

Answer 2

Qj units

Question 1.

Figure 13-17

Refer to Figure 13-17. What is the allocatively efficient output for the firm represented in the diagram?

Qf units

Qg units

Qh units

Qj units

Question 2.

Figure 13-17

Refer to Figure 13-17. What is the amount of excess capacity?

Qh - Qg units

Qj - Qf units

Qh - Qf units

Qj - Qh units

Answer 1

Qh units

Answer 2

Qj - Qf units

Figure 13-17

Refer to Figure 13-17. Suppose the firm is currently producing Qf units. What happens if it increases its output to Qg units?

It will be taking advantage of economies of scale and will be able to lower the price of its product.

Its average cost of production will fall and its profit will rise.

It will move from a zero profit situation to a profit situation.

It will move from a zero profit situation to a loss situation.

It will move from a zero profit situation to a loss situation.

Figure 13-17

Refer to Figure 13-17. In the long run, why will the firm produce Qf units and not Qg units, which has a lower its average cost of production?

At Qg, marginal revenue is less than average revenue which will result in a loss for the firm.

The firm's goal is to charge a high price and make a small profit rather than a low price and no profit.

At Qg, average cost exceeds marginal cost so the firm will actually make a loss.

Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss.

Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss.