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Microeconomics
Posted 9 months ago
This waph represents the rarker for percils, which is perinctls corpetitive
Which of the fullowing best repsesent the demand. marsinal revenue, and costs curves for asirgiz firin in this market?
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Mesth iesterw
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Answer from Sia
Posted 9 months ago
Solution
a
Diseconomies of Scale: Diseconomies of scale occur when a firm experiences an increase in average costs as it increases its output. This can happen due to factors such as management inefficiencies, increased complexity, and communication problems
b
Optimal Consulting Hours: To maximize profits, a firm should set the number of consulting hours where marginal revenue (MR) equals marginal cost (MC). This is the point where the additional revenue from one more hour of consulting equals the additional cost of providing that hour
c
Impact of Additional Labor: The average product of labor (APL) is calculated as total output divided by the number of units of labor. Adding one more unit of labor can either increase or decrease the APL depending on whether the marginal product of labor (MPL) is greater or less than the current APL
d
Competitive Market Graph: In a perfectly competitive market, the demand curve (D) for a single firm is perfectly elastic, meaning it is a horizontal line at the market price. The marginal revenue (MR) curve is also a horizontal line at the same level as the demand curve. The correct graph should show an upward sloping marginal cost (MC) curve, a horizontal D=MR line, and U-shaped average total cost (ATC) and average variable cost (AVC) curves
Answer
The correct answer is Answer choice 4.
Key Concept
Diseconomies of scale, profit maximization, average product of labor, and competitive market graph representation
Explanation
Diseconomies of scale occur due to inefficiencies at higher output levels. Profit maximization is achieved where MR equals MC. The impact of additional labor on APL depends on the MPL. In a competitive market, the firm's demand and MR curves are horizontal at the market price, and the correct graph should reflect this.
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