refer to the graph below. the level of output at which this firm will produce is course hero

What is the level of output at which a firm shuts down?

If a competitive firm shuts down in the short run they will realize a loss equal to their total fixed costs. Refer to the graph below. The level of output at which this firm will shut down is: 0A Explanation: Profit maximizing firms produce where Marginal Revenue = Marginal Cost.

When should a firm increase the quantity of output?

A firm should increase the quantity of output as long as its: Marginal revenue is greater than its marginal cost Explanation: We make an assumption that firms in a for-profit industry seek to maximize their profits.

What is the short-run profit-maximizing level of output for the firm?

4 16 9 5 20 14 4 units Explanation: To find the short-run profit-maximizing level of output for the firm, we have to find the point at which the marginal revenue and the marginal cost are equal. Since total revenue goes up by $4 for each additional unit of production, we know that the marginal revenue = $4.

What is the output of a purely competitive firm?

A purely competitive firm's output is currently such that its marginal cost is $4 and marginal revenue is $5. Assuming profit maximization, the firm should: Leave price unchanged and raise output

What is the supply curve of a purely competitive market?

In the purely competitive market, all the goods produced, marketed, and sold are homogenous (or the same). In the short run the individual competitive firm's supply curve is the segment of the: marginal cost curve lying above the average variable cost curve.

What is the demand curve for a firm?

If a firm is a price taker, then the demand curve for the firm's product is: Perfectly elastic . Explanation: If a firm is a price taker, it means that they operate in a purely competitive market. One of the characteristics of the purely competitive market is a perfectly elastic demand curve.

What happens if the marginal revenue is greater than the marginal cost?

If the Marginal Revenue (payment they receive for producing and selling the next unit of their output) is greater than the Marginal Cost (the cost of producing the next unit of their output), then the firm will put money toward its bottom line by producing that unit.

What happens when a firm shuts down?

Explanation: When firms shut down, they do not incur the costs of production, but they still have to pay their overhead. The costs of production are their variable costs. The overhead costs are fixed. If a competitive firm shuts down in the short run they will realize a loss equal to their total fixed costs.

Is a product homogeneous or standardized?

Products are standardized or homogeneous. Explanation: Firms in the purely competitive market are price takers, so all firms in the industry will have the same price for their goods. Entry and exit in this market structure is free, so there are no barriers to entry.