Question

Q.5 A competitive firm's short-run cost int table below. con 3 5 VG Fixed Variable Output Cost Cost $9.00 $ 0.00 19.00 8.00 19.00 15.00 19.00 21.00 19.00 26.00 9.00 32.00 19.00 39.00 19.00 147.00 9.00 56.00 19.00 166.00 19.00 177.00 Total Cost $ 9.00 17.00 24.00 30.00 35.00 41.00 48.00 56.00 165.00 175.00 186.00 a. Sug desire Comp total choic level minit b. R falle U90 luqar U OL-nu ada

repeat part a assuming the price has fallen $7.10

suppose the firm can sell all the output is desire at the market

Answer 1

Answer a : Profit maximisation condition :

MR=MC

As we know MR= $9.10

Total revenue =$9.10*8= $72.8

Total cost =$65

MC at 8 unit of output =$9

So, the profit is maximum at 8 unit of output = $72.8-$65=$7.8

Answer b : Profit maximisation condition

MR =MC

MR= $7.10

Total revenue =$7.10*6= $42.6

MC =$7

Total cost at 6 unit of output = $48

Total profit gained from selling 6 unit of output =R-C = $42.6-$48= ($5.4)

Therefore, economic loss is $5.4