Use the following information to answer the next 4 questions: The graph below shows cost curves for a perfectly competitive firm. Suppose that the market price is $2.60. Price and cost (dollars) 2.60 1.60 1.50 0.80 0.70 0.60 500 800 1100 Output SMC ATC AVC Question 5 A firm producing 800 units of output a) is earning the maximum amount of profit, $880. b) is earning the maximum amount of profit, $2,080. c) should instead produce 500 units of output in order to earn profits of $500. d) should instead produce 1100 units of output in order to earn profits of $1,100. e) should shut down. Question 6 A profit-maximizing firm will break even when the market price is a) $0.60 b) $0.80 c) $1.50 d) $1.60 e) None of the above. Question 7 If the market price declines to $0.70, a profit-maximizing firm will produce units of output and earn profits of_ a) 500,-$450 b) 500,-$50 c) zero, -$450 d) zero, -$400 e) None of the above. Question 8 At the market price of $2.60, what can be expected to occur in this competitive industry over the long-run? a) Industry supply will increase and the market price will decrease. b) Industry supply will decrease, and the market price will decrease. c) Industry demand for the product will increase, and the market price will increase. d) Industry demand for the product will decrease, and the market price will decrease. e) None of the above.

Hand written solutions are strictly not acceptable.

The following cost data is for a firm which is selling in a perfectly competitive market: Average fixed Average variable Average total Total Marginal cost S17 product cost S100.00 50.00 33.33 25.00 20.00 cost $17.00 cost $117.00 66.00 47.33 39.25 34.00 2 16.00 15 3 4 15.00 14.25 14.00 14.00 15.71 17.50 13 12 13 16.67 14.29 12.50 11.11 10.00 9.09 7.33 30.67 30.00 14 26 30 35 7 8. 9. 10 11 30.00 30.55 31.60 33.09 35.00 19.44 21.60 41 24.00 48 12 26.67 56 Refer to the data above. If there were 600 identical firms in this industry and total or market demand is as shown below, equilibrium price will be: Quantity demanded 3,000 6,000 9,000 11,000 14,000 19,500 Price $50 42 36 32 20 13 $36

Assume that the cost data in the following table are for a purely competitive producer:   TotalProduct AverageFixed Cost AverageVariable  Cost AverageTotal Cost Marginal Cost 0         1 $60.00 $45.00 $105.00 $45.00 2 30.00  42.50  72.50 40.00 3 20.00  40.00  60.00 35.00 4 15.00  37.50  52.50 30.00 5 12.00  37.00  49.00 35.00 6 10.00  37.50  47.50 40.00 7 8.57  38.57  47.14 45.00 8  7.50  40.63  48.13 55.00 9  6.67  43.33  50.00 65.00 10  6.00  46.50  52.50 75.00   Instructions: If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers. Select "Not applicable" and enter a value of "0" for output if the firm does not produce. a. At a product price of $56.00        (i) Will this firm produce in the short run?    (Click to select)   No   Yes         (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output?                (Click to select)   Not applicable   Loss-minimizing…