Question

and output of 400 14. A perfect competitor would produce at a price of Price cost marginal revenue of diamond $1,000 800 P600 V P6200- MC -200 MR 15 20 QwQc Quantity of diamonds a. $600: 8 units b. $200; 8 units c. $200; 16 units d. $600: 16 units 15. All the businesses in this industry have the same costs and all of them produce 24 units of product. This means that: Quantity Total Explicit Implicit Revenue Costs Costs 12 58 24 10 78 98 125 153 102 23 147 a new firms will enter the industry. b. old firms will exit the industry. c. firms will attempt to lower their implicit costs. d. price must rise. 16. You assemble cardboard boxes for a moving company in your basement. The total cost of assembling 10 boxes is $6 and your fixed costs are $1.50. Your AVC is a b. C. d. $4.50 $4 $0.54 $0.45 17. You bake made-to-order specialty cakes. The total cost for these is TC = 300 - 100. Q is the quantity of cakes you make. You baked 100 cakes so your ATC is a. $13 b. $1.30 C. $13.10 d. $1.03

Answer 1

Answer 14

Option C is correct.

In a perfect market competetion, the firms produce at the point where marginal cost equals to the price. Therefore, according to the given graph, the perfect competitor should produce at the point C. At point C the price is equal to the marginal cost.

At point A, the price is $200 and quantity demanded is 16 units.

Except from option C all the options are incorrect because the price and quantity on these options are not $200 and 16 units respectively.

Note: In the perfect competition, price is equal to the marginal revenue. Hence the profit maximizing consition is same as of marginal revenue equal to the marginal cost.