Question

Week 3 Assignment Worksheet Complete the following table. Be sure to copy/paste your completed table into your Assignment submission. Total Average Average Marginal Price Total Profits Fixed Variable Costs Widgets Produced Costs MR Cost Costs Variable Cost Cost 10 10 25 0 1 10 2 15 10 3 23 32 4 10 5 42 10 53 6 10 7 65 10 8 78 10 92 10 223 20823 9 6 25 53 10 7 25 65 10 25 78 10 10 25 92 Based on your answers to the previous set of questions, assuming there are 100 identical firms in the widget industry, construct a table showing the industry supply curve. Then, explain what you expect will happen over time to the number of firms in the industry and the equilibrium industry price of widgets. Your response should be at least 75-150 words (1-2 paragraphs) in length, including the table. Note: For each prompt, be sure to reference at least one scholarly source to support your answer. Use the Walden Submit your responses to the following prompts. Using the definition and characteristics of perfectly competitive industries, explain why-in the long run-firms earn zero economic profits. Does this mean that competitive firms earn zero accounting profits? Your response should be at least 75-150 words (1-2 paragraphs) in length. Joe's Widget Factory operates in a perfectly competitive industry. Joe's fixed and variable costs are given in the table below. He is a price taker and can sell as many widgets as he produces for $10 each. Complete the table using the provided link and respond to the following questions. Besides referring to your table to support your answers, include references from the course materials on profit-maximizing rules for competitive firms. Your response should be at least 75-150 words (1-2 paragraphs) in length, including table. What is the profit maximizing (or loss minimizing) level of output in the short run? What is the profit maximizing level of output in the long run? What are the shut-down prices in the short run and long run? What is the firm's supply curve?

Answer 1

Widgets produced	Fixed cost	Variable cost	Total cost	Avearge variable cost	Average total cost	Marginal cost	Price = MR	Revenue	Profits(TR-TC)
0	25	0	25	0.00	0	25	10	0	-25
1	25	8	33	8.00	33	8	10	10	-23
2	25	15	40	7.50	20.00	7	10	20	-20
3	25	23	48	7.67	16.00	8	10	30	-18
4	25	32	57	8.00	14.25	9	10	40	-17
5	25	42	67	8.40	13.40	10	10	50	-17
6	25	53	78	8.83	13.00	11	10	60	-18
7	25	65	90	9.29	12.86	12	10	70	-20
8	25	78	103	9.75	12.88	13	10	80	-23
9	25	92	117	10.22	13.00	14	10	90	-27

As profits are in negative and there are 100 firms in the industry, no one will wants to operate in the long run as they have to pay for the variable cost as well as the fixed cost from their pocket and eventually they will end up with nothing. Short run Supple curve in perfectly competitive market is that portion of its marginal cost curve that lies above the minimum of the average variable cost curve.

• The entry and exit of firms, which is possible in the long‐run, will eventually cause each firm's economic profits to fall to zero. Hence, in the long‐run each firm earns normal profits. If some firms are earning positive economic profits in the short‐run, in the long‐run new firms will enter the market and the increased competition will reduce all firms' economic profits to zero. Firms that are earning negative economic profits (losses) in the short‐run will have to either make some changes in their fixed factors of production in the long‐run or choose to leave the market in the long‐run. A perfectly competitive market achieves long‐run equilibrium when all firms are earning zero economic profits and when the number of firms in the market is not changing. No this does not mean the accounting profit is zero. Zero economic profits just tells us how the resources are allocated among possible production options.
• In short and long run both profit maximization are the point where MR=MC, so at quantity production level of 5, we have MR=MC=10
• Shut down situation comes when AR=AVC, AR=MR in pefect competitive market. Thus it produce 10 quantities because at the point of time where AVC surpasses AR.
• Short run Supple curve in perfectly competitive market is that portion of its marginal cost curve that lies above the minimum of the average variable cost curve.
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Answer 2

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