A perfectly competitive firm faces the short-run cost schedule shown in Table 1. 5 6 7 52 68 93 Output 1 3 4 8. Total Cost 12 20 26 32 40 122 Table 1 A) Calculate average total cost (ATC=TC/Q), marginal cost (MC=ATC/AQ) and marginal revenue (MR=ATR/AQ) for each level of output. The price per unit of output is £16. B) Plot ATC, MC and MR on a graph and mark the profit-maximising output. At what output is profit maximised? C) How much profit/oss is made at the optimum level of output? D) Assume market price declines to £9 per unit. If the firm's average variable cost is £9.5, should the firm shut down in the short run? In the long run? Explain. E) If the firm is typical of other firms, what price will it charge in the long run? Explain.
A perfectly competitive firm faces the short-run cost schedule shown in Table 1. 5 6 7 52 68 93 Output 1 3 4 8. Total Cost 12 20 26 32 40 122 Table 1 A) Calculate average total cost (ATC=TC/Q), marginal cost (MC=ATC/AQ) and marginal revenue (MR=ATR/AQ) for each level of output. The price per unit of output is £16. B) Plot ATC, MC and MR on a graph and mark the profit-maximising output. At what output is profit maximised? C) How much profit/oss is made at the optimum level of output? D) Assume market price declines to £9 per unit. If the firm's average variable cost is £9.5, should the firm shut down in the short run? In the long run? Explain. E) If the firm is typical of other firms, what price will it charge in the long run? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
questions d and e only please
Transcribed Image Text:A perfectly competitive firm faces the short-run cost schedule shown in Table 1.
Output
1
2
3
4
6.
7
8
Total Cost
12
20
26
32
40
52
68
93
122
Table 1
A) Calculate average total cost (ATC=TCIQ), marginal cost (MC=ATC/AQ) and
marginal revenue (MR=ATR/AQ) for each level of output. The price per unit of
output is £16.
B) Plot ATC, MC and MR on a graph and mark the profit-maximising output. At what
output is profit maximised?
C) How much profitvloss is made at the optimum level of output?
D) Assume market price declines to £9 per unit. If the firm's average variable cost is
£9.5, should the fimm shut down in the short run? In the long run? Explain.
E) If the firm is typical of other firms, what price will it charge in the long run? Explain.
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