Question

Worksheet on Perfect Competition Welcome to Acme Widgets. The Acme Company manufactures widgets and competes in a Perfectly Competitive market structure. In fact, all widgets are the same, regardless of who made them. The widget industry is huge, with many firms, and Acme, like all the other firms can sell all it wants without affecting the market price. The following table represents the current short-run revenue, costs, and profits for Acme or copy the data into a spreadsheet INSTRUCTIONS: You should either print this page/table If you wish, you can download these data tables as a .csv file that can be opened in Excel or similar spreadsheets. Download as .csv file. If these tables do not print when you use the "download as .pdf" button at the top of this page, you can click here to open the data tables as a new webpage and print using your browser. Then you need to complete the remaining columns using the data given. You can then answer the questions below using the data you have calculated. TIP: For questions that require an answer in money, please do not use dollar signs but use decimals. Ex: if the answer were $9.99 or -$9.99, you should enter either 9.99 or -9.99 respectively. If the amount is less than a dollar, be sure to put a o for the dollar amount such as: 0.33 HINT: You are only given data for total costs. It first appears that you don't know anything about how the total cost is split into fixed cost and variable cost. But, it's there. It's hiding. Ask yourself the following questions and you can find out what total fixed costs are. Then you can subtract the Total Fixed Costs from Total Costs to get Total Variable Costs.

Answer 1

Market Price	Qty	Total Revenue	Total Cost	Marginal Cost	Marginal Revenue	Average Variable Cost	Average Total Cost	Economic Profit
$4	0	$0	$10.20
$4	1	$4	$14.20	$4.00	$4	$4.00	$14.20	($10.20)
$4	2	$8	$17.80	$3.60	$4	$3.80	$8.90	($9.80)
$4	3	$12	$20.60	$2.80	$4	$3.47	$6.87	($8.60)
$4	4	$16	$23.10	$2.50	$4	$3.23	$5.78	($7.10)
$4	5	$20	$25.70	$2.60	$4	$3.10	$5.14	($5.70)
$4	6	$24	$28.50	$2.80	$4	$3.05	$4.75	($4.50)
$4	7	$28	$31.50	$3.00	$4	$3.04	$4.50	($3.50)
$4	8	$32	$34.70	$3.20	$4	$3.06	$4.34	($2.70)
$4	9	$36	$38.10	$3.40	$4	$3.10	$4.23	($2.10)
$4	10	$40	$41.70	$3.60	$4	$3.15	$4.17	($1.70)
$4	11	$44	$45.50	$3.80	$4	$3.21	$4.14	($1.50)
$4	12	$48	$49.50	$4.00	$4	$3.28	$4.13	($1.50)
$4	13	$52	$53.70	$4.20	$4	$3.35	$4.13	($1.70)
$4	14	$56	$58.20	$4.50	$4	$3.43	$4.16	($2.20)
$4	15	$60	$63.20	$5.00	$4	$3.53	$4.21	($3.20)
1) Total fixed cost is equal to total cost when output is 0. Total fixed cost = $10.20
2) Average variable cost at Q = 14 is $3.43
3) Marginal Revenue equal marginal cost at Q = 12 and Q = 1.
4) Profit is maxmaximized at output level where MR =MC. Therefore, profit is maximized
at Q = 12 units.
5) The firm will incur loss of $1.50.
6) Since the firms are incurring loss this will result in decrease in the number of firms.

Formula:

Total Revenue = Price*Qty

Marginal Revenue = (TR)_n-(TR)_n-1

Average Total Cost = Total Cost/Qty

Average Variable cost = Variable Cost/Qty

Marginal Cost = (TC)_n - (TC)_n-1