Cost Function Practice Worksheet and Decision Making in the Purely Competitive M
ID: 1108333 • Letter: C
Question
Cost Function Practice Worksheet and Decision Making in the Purely Competitive Market 2. Assume the data from question 1 represents a purely competitive firm a. Determine the units produced by this firm if P-$2.00. b. Calculate the firm's profit or loss if P=$2.00. c. Determine the units produced by this firm if P-$3.25. d. Calculate the firm's profit or loss if P=$3.25. e. Determine the units produced by this firm if P=$6.50. f. Calculate the firm's profit or loss if P=$6.50. g. What happens in the long-run at each price if nothing changes?Explanation / Answer
a) When price is $2.00, the rising MC is $2.00 when Q = 9 units.
b) At this quantity, the firm is bearing an ATC of 4.14. Then the loss is (2 - 4.14)*9 = -19.26
c) When P = 3.25, Rising MC is 3.25 when Q = 11.
d) At this quantity proft = (3.25 - 3.93)*11 = -7.48
e) When P = 6.50, rising MC is 6.50 when Q = 13
f) At this quantity, profit = (6.50 - 4.19)*13 = 30.03
g) In the long run there will be no economic profit as each firm produces at minimum of ATC which is P = min ATC = 3.93 and Q = 11 units