Question

Table 3 Q Toasters | TVc TFC TC - TAVc- TC NA $10 so s500 $500 NA SO IS500 $200 S500 $700 $10 20 60 110 150 180 200 210 215 S400 $500 $9006.67S5 $600 S500 $1,100 $5.45 $4 $800 $500 S1,300 $5.33 $5 $1,000 $500 $1500 $5.56 S6.67 $1,200 $500 $1.700 $6 $1400 S500 $1,900 $667 $20 $1.600 $500 $2,100 $7.44 $40 $10 19. The information in Table 3 represents a perfectly competitive firm's cost curves. Derive this firm's supply curve and enter it into Table 4. (12 points) Table 4 Profit Price per Toaster $5.00 $10.00 $25.00

Answer 1

A Perfectly competitive market supplies where price is equal to the marginal cost.

At a price of $25, the firm will supply where P > MC and not where P < MC when the marginal cost is not in line with the market price. If the firm supplies where P < MC, it will incur losses. Hence, firms will supply where the market price exceeds marginal cost.

Therefore, at P = $25, Quantity Supplied is where MC = $20, that is, 210.

Profits = PQ - TC

Profits = (25 X 210) - 1900

Profits = 5,250 - 1900

Profits = $3,350