Question

suppose a competitive firm has the following cost:

Q 0 1 2 3 4 5 6 7 8 9

TC ($) 50 54 62 74 90 110 134 162 194 230

(Q: output ; TC: total cost)

This cost table is related to a competitive firm.

Q TC

0 30

1 50

2 66

3 80

4 90

5 100

6 114

7 131.2

8 150

9 190

NOTE: FIND TFC, TVC ,AVC, ATC, MC

Using this table above, answer the following questions.

6 Complete the table above.

7 Plot ATC, AVC, and MC in one diagram.

8 What is the shutdown price?

9 At a price of $18.8 how much should the firm produce to maximize profit?

10 At a price of $18.8 calculate its profit.

please show mw how you got the result not only the answer. thank you

Answer 1

6)

Quantity	TC	TVC	TFC	AVC	ATC	MC = ΔTC / ΔQ
0	30	0	30
1	50	20.00	30	20.00	50.00	20.00
2	66	36.00	30	18.00	33.00	16.00
3	80	50.00	30	16.67	26.67	14.00
4	90	60.00	30	15.00	22.50	10.00
5	100	70.00	30	14.00	20.00	10.00
6	114	84.00	30	14.00	19.00	14.00
7	131.2	101.20	30	14.46	18.74	17.20
8	150	120.00	30	15.00	18.75	18.80
9	190	160.00	30	17.78	21.11	40.00

7)

60 50 40 Profit AVCATC,MC 30 ATC AVC +MC = ATC / 40 20 LO 0 0 2 4 6 8 10 Quantity

8) A perfectly competitive firm will shutdown if P<AVC. Thus shutdown price is at the minimum AVC where MC=AVC. Thus the required shutdown price is $14.

9) A perfectly competitive firm will produce at the output level where P=MC in order to maximize profit. Thus the required level of output at P = $18.80 is 8 units of output.

10) economic profit = ( P-ATC)*Q
= (18.80 - 18.75)*8 [At P =$18.80 required ATC= $18.75]
= $ 0.4
Hence, the required economic profit at P=$18.80 is $0.4