Solve: Assume this is a perfectly competitive market. Answer the following questions and explain your answers. Complete the table. Q TC FC VC AFC AVC ATC MC 0 $6.50 1 $9.50 2 $10.50 3 $11.50 4 $12.50 5 $13.50 67 $14.50 $18.00 8 $22.00 9 $26.50 10 $31.50 Assume that the market price is $3.50: What is the profit-maximizing level of output for this firm? What is the dollar amount of the profit, or loss? Canter What would happen with the number of firms in this market if the price drops to $3.00? Why? What would be the economic profit, or loss, for this firm if the fixed cost increases by $1.50 and the market price remains at $3.50? What is the long-run equilibrium price for this company? What is the shut-down price for this company?

What are the three conditions for a market to be perfectly​ competitive? For a market to be perfectly​ competitive, there must be   A. many buyers and​ sellers, with all firms selling identical​ products, and no barriers to new firms entering the market.   B. many buyers and nothing​sellers, with all firms selling identical​ products, and substantial barriers to new firms entering the market.   C. many buyers and​ sellers, with firms selling similar but not identical​ products, with low barriers to new firms entering the market.   D. many buyers and one​ seller, with the firm producing a product that has no close​ substitutes, and barriers to new firms entering the market.

ATC MC Z AVC V. W $13 $10 T $7 $4 N 5 7 9 10 12 144 The graph above shows cost curves of a firm in a competitive market. Several points are marked on the graph to allow tracing curves. Some of them can also be used to indicate various prices. Refer to the graph to answer the following questions: 1. The short-run supply of the firm can be traced by connecting points 2. If the market price is $4 then in the short-run the firm would supply units. At this price the firm would 3. If the market price is $10 then in the short-run the firm would supply units. At this price the firm would 4. If the market price is $7 then in the short-run the firm would supply units. At this price the firm would 5. In the short run, the firm is better off continuing to operate (i.e. Q>0) despite losses if the price is in the interval above and below %24

Suppose that the market for polos is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. Esc 50 PRICE (Dollars per polo) 78°F Sunny 45 40 F1 35 30 25 20 15 10 5 0 + 0 + 2 F2 MC -0- + 4 ATC AVC 6 8 10 12 14 QUANTITY (Thousands of polos) F3 0+ F4 69 16 18 F5 20 a F6 i I F7 4- F8 Q+ H F9 F10 FO F11 F12 Fn Lock Ins