Microeconomics Fun Set # 2 1. Perfect Competition (Short-run): Answer the follow
ID: 1106728 • Letter: M
Question
Microeconomics Fun Set # 2 1. Perfect Competition (Short-run): Answer the following questions based on the graph shown: Priee A.T.C. 20 15 14 35 45) ss 25 a. Which line indicates the demand curve? MR AR P b. In the short run if the output is 10, what is the price? What about if the output is 25 what is the price? What about if the output is 55 what is the price? c. At what level of output and at what price does the ATC reach its minimunm point in the short run? Remember that perfect competitive firms are price takers. d. If a firm produced at the point where ATC reached its minimum what would the total revenue in the short run? e. What would the total cost be at that point in the short run? f. What would the total profit be at the point that ATC reaches its minimum in the short run? g. At what price and output is profit maximized in the short run? h. What is total revenue at the profit maximum point in the short run? i. What is total profit at the profit maximum point in the short run? j. What would happen to this market in the long run?Explanation / Answer
Ans)
a.
MR=AR=P is the demand curve for the given graph.
b.
In the short run if the output is 10 the price will be 20 furthermore if the output is 25 the price is still 20.
c.
ATC reaches its minimum at a price of 14 and an output level of 35.
d.
TR=Price *Quantity
Price=20
Quantity=35
TR=20*35
TR=700
e.
TC=ATC*Q
TC=35*14
TC=490