Question

AT&T wi-Fi 令 2:32 PM 2. (8 points) Answer the questions below using the cost curves for the price-taking firm shown in the following graph T 50 a(2 points) If price is $60 per unit of output, draw the marginal revenue curve. The manager should produce units to maximize profit. (2 points) Because average total cost is S for this output, total cost is S (1 point) The firm makes a profit of S. (1 point) At units, profit margin (or average profit) is maximized. (2 points) If price falls below S the firm will produce zero output. Explain why

already answered these but, not certain I did it right. especialy D and E.

Answer 1

The equilibrium for a firm in a perfectly competitive market is at P=MC. The price given is 60 so MR=AR=MC=60 is the point of equilbrium. The output determined is Q* = 3500 units at a price of 60. The average total cost of production is 37 for the given output of 3500. The profits can be calculated by the formula

Profits = (P-ATC)*Q = (60-37)*3500 = 80500

The firm shuts down when price falls below min AVC which is $17.5.

3500 (2 points) If price is $60 per unit of output, draw the marginal revenue curve. The manager should produce 3500 units to maximize profit 37 for this (2 points) Because average total cost is S output, total cost is $ 37 3500-129500 (60-37) 3500 ( point The firm makes a profit ofs 80500( (I point) At 3500 units, profit margin (or average profit) is maximized. (2 points) If price falls below S the firm will ice falls below s 17.5 the fim ill produce zero output. Explain why.