Homework Answers
F
At q*, Q=7, P= $28. Total revenue = $28 x 7=$196
Total cost = P=$32 x 7=$224.
Loss= $224- $196= $28.
q*= MC=MR. MR=P in perfect competition
G./ Profit will be zero.
H, Shutdown as the firm is making an economic loss, In the long run, a competitive firm is in equilibrium when MR=MC=AC. It will produce that output where LMC=LAC. Because if P is less than AC, the firm is suffering a loss.
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2. A firm sells its product in a perfectly competitive market where other firms charge a price of $80 per unit. The firm's total costs are C(O) 40 80202 a. How much output should the firm produce in the short run? b. What price should the firm charge in the short run? c. What are the firm's short-run profits? d. What adjustments should be anticipated in the long run? 42 MC ATC 32 AVC 24 18 14 I0 AFC Quantity...
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