Question

Answer all the questions below by looking at the average cost, marginal cost nand curves for firm X shown here ot. 3 50 300 400700 17) Is this firm in a perfectly competitive industry ? How do you know 18) On the diagram above, AVERAGE VARIABLE COST is the HIGHEST at what Quantity ? 19) On the diagram above, AVERAGE FIXED COST is HIGHEST at. what Quantity ? 20) If the market Price-$100, what is the profit maximizing output level for this firm ? 21)At the output level you answered for question (20), what will be the TOTAL PROFITS for this firm? 22) What is the socially optimal price for this firm ? 23) What quantity will this firm producc in the LONG RUN? 24) This firm would make POSITIVE profits if the market price was above what Xhow many dollars ?) 25) what quantity is the MACMUM TECHNICAL EFFİCENCY output for this firm?

Answer 1

18. AVC is highest at Q=50 and 700
19. AFC at Q=50
20. At Q=400
21. Profit = 400*(100-50)=20000
22. Socially optimal price = 300 as it is at the minimum level of AC
23. Q=300, Long run output is at a point where AC is at minimum
24. Profit = 0, as TR=TC
25. Technically efficient is at output where AC is minimum