B. Consider the graph of a perfectly competitive firm: Price 175 125 100 80 270 322 515 MC ATC AVC Quantity a. At the market price of $80 per unit, what is the profit maximizing level of output? Why is this the profit maximizing level output? If the price drops to $75, what is the profit maximizing level of output and why? b. If the market price is $125 and the firm is producing 322 units of output, is the firm profit maximizing? Why or why not? If the firm is not profit maximizing, what should the firm do to maximize profit. c. If due to a surge in demand the market price increases to $175, what is the profit maximizing level of output and why? What is the firm's short run economic profit (or loss) at this level of output? (Show solution) d. At the price of $175, what is the firm's fixed cost? If there are 1000 identical firms in the market, how much is the total market supply at the price of $175? (Show solution) e. Suppose this firm were in a long run equilibrium, what will be the price, output and economic profit that will likely prevail and why?

B. Consider the graph of a perfectly competitive firm: Price 175 125 100 80 270 322 515 MC ATC AVC Quantity a. At the market price of $80 per unit, what is the profit maximizing level of output? Why is this the profit maximizing level output? If the price drops to $75, what is the profit maximizing level of output and why? b. If the market price is $125 and the firm is producing 322 units of output, is the firm profit maximizing? Why or why not? If the firm is not profit maximizing, what should the firm do to maximize profit. c. If due to a surge in demand the market price increases to $175, what is the profit maximizing level of output and why? What is the firm's short run economic profit (or loss) at this level of output? (Show solution) d. At the price of $175, what is the firm's fixed cost? If there are 1000 identical firms in the market, how much is the total market supply at the price of $175? (Show solution) e. Suppose this firm were in a long run equilibrium, what will be the price, output and economic profit that will likely prevail and why?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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