Question

#12

PART 4 (20 POINTS) Total Cost Fixed Cost Variable Cost Marginal Cost Average Total Cost (# tables) 0 $150 175 210 255 310 375 450 535 630 The table above depicts monthly costs for Tanya’s Table company, an independent table producer in the perfectly competitive market for handmade tables. Tanya rents a production space each month at a cost of $150.

Answer 1

Ans:

Q (# tables)	Total Cost	Fixed Cost	Variable Cost	Marginal Cost	Average Total Cost
0	$150	$150	$0	--	--
1	175	150	25	$25	$175
2	210	150	60	35	105
3	255	150	105	45	85
4	310	150	160	55	77.5
5	375	150	225	65	75
6	450	150	300	75	75
7	535	150	385	85	76.43
8	630	150	480	95	78.75

Explanation:

Total cost = Total Fixed cost + Total Variable cost

Total Variable cost = Total cost - Total Fixed cost

Fixed costs are even available in the zero level of production and remain constant throughout the subsequent level of production.

MC = Change in total cost / Change in Q

ATC = Total cost / Q

12. Ans:The market price of $85 can not be the long-run equilibrium price.

Because under perfect competition , at the long-run equilibrium following conditions must be fulfilled;

• P = MC and P = ATC.
• At the equilibrium point , MC curve cuts the ATC curve at its minimum point .

In the above table , it is cleared that , $75 can be the equilibrium price where P = MC = ATC