Q1:(A) Assume the following cost data are for a purely competitive producer: total productaverage fixed costAverage variable cost Average total cost Marginal cost0 $451$60$45$105$402$30$42.5$72.5$353$20$40$60$304$15$37.5$52.5$355$12$37$49$406$10$37.5$47.5$457$8.57$38.57$47.14$558$7.50$40.63$48.13$659$6.67$43.33$50$7510$6$46.50$52.5 At a product price $56.will this firm produce in the short run? why or why not? if it is preferable to produce, what will be the profit maximizing or loss- minimizing output? explain what economic profits or loss will the firm realize per unit of output ? Use MR-MC approach also show economic profit graphically.

The firm produces as long as Price >= MC. When P = 56: If Q = 7, Price > MC (56 > 55) but…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter11: Price And Output Determination: Monopoly And Dominant Firms

Section: Chapter Questions

Problem 6E

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Q1:(A) Assume the following cost data are for a purely competitive producer:

total product	average fixed cost	Average variable cost	Average total cost	Marginal cost
0				$45
1	$60	$45	$105	$40
2	$30	$42.5	$72.5	$35
3	$20	$40	$60	$30
4	$15	$37.5	$52.5	$35
5	$12	$37	$49	$40
6	$10	$37.5	$47.5	$45
7	$8.57	$38.57	$47.14	$55
8	$7.50	$40.63	$48.13	$65
9	$6.67	$43.33	$50	$75
10	$6	$46.50	$52.5

At a product price $56.will this firm produce in the short run? why or why not? if it is preferable to produce, what will be the profit maximizing or loss- minimizing output? explain what economic profits or loss will the firm realize per unit of output ? Use MR-MC approach also show economic profit graphically.

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