Question

Cost Functions of a Firm $2,500 $2,280 - $2,250 - $1,980 $2,000 $1,608 $1,680 $1,750 $1,380 $1,200 $1,500 $1,342 $1,251 $1,200 $1,250 $1,248 $1,000 L $1,200 $840 - $660 $750 $480 - $120 $500 $607 $120 $240 $250 $240 0 1 2 3 4 8 9 10 11 12 5 6 7 Output Produced (q)

Answer 1

Answer 6 : Suppose that these cost function pertain to a perfectly competitive firm.If the market price of the product P =$1200 per unit, the firm will produced 9 units of output where the profit is maximum. The firm revenue is equal to $1200*9 = $10,800 where as firm cost is equal to $1200*8 = $10,800 and it will make no economic profit as in this case price is not greater than average total cost. The producer surplus is equal to 0.5*( $1200-$1200)*9 = $0

moreover, if the market price of the product is $ 1200 than they are able to cover the fixed cost of 2500 dollar.

Answer 6 : Suppose that these cost function pertain to a perfectly competitive firm.If the market price of the product P =$840 per unit, the firm will produced 8 units of output where the profit is maximum. The firm revenue is equal to $840*8 = $ 6720 where as firm cost is equal to $12000*8 = $9600 and it will make no economic profit as in this case price is not greater than average total cost. But incurred an economic loss . The producer surplus is equal to 0.5*( $840-$840)*8= $0

moreover, if the market price of the product is $ 840 than they are able to cover the fixed cost of 2500 dollar.