Question

Assume that a purely competitive firm has the following schedule of average and marginal costs: Output 1 AFC $300 150 100 No от во 60 50 43 38 33 30 AVC $100 75 70 73 80 90 103 119 138 160 ATC $400 225 170 148 140 140 146 156 171 190 MC $100 50 60 80 110 140 180 230 290 360 9 10 e. At a price of $55, the firm would produce units of output. At a price of $120, the firm would produce units of output. At a price of $200, the firm would produce units of output. f. The per-unit economic profit (or loss) is calculated by subtracting - at a particular level of output from the product price. This per-unit economic profit is then multiplied by the number of units of to determine the economic profit for the competitive firm. i. At the product price of $200, the average total costs are $_ so per-unit economic profit is $ Multiplying this amount by the number of units of output results in an economic profit of $ ii. At the product price of $120, the average total costs are $ so per-unit economic losses are $ Multiplying this amount by the number of units of output results in an economic loss of $_

Answer 1

a and b)

P	QS	Profit	QS-100 FIRMS
360	10	1700	1000
290	9	1071	900
230	8	592	800
180	7	238	700
140	6	0	600
110	5	-150	500
80	4	-272	400
60	0	0	0

e) P=55

Produce = 2 units

P=120

Produce = 5 units

P=200

Produce = 7 units

f) The per unit is calculated by subtracting ATC which is then multiplied by the number of units of output produced to determine the economic profit

i) At P=200

ATC = 146

Per unit profit = 200-146 = 54

Economic profit = 54*7 = 378

ii) At P=120

ATC = 140

Per unit loss = 120-140 = 20

Economic loss = 20*5 = 100