Total Product Total Costs Average Total Costs Average Variable Costs Marginal Co
ID: 1222156 • Letter: T
Question
Total Product
Total Costs
Average Total Costs
Average Variable Costs
Marginal Cost
0
100.00
1
117.00
2
66.00
3
48.33
4
39.25
5
34.00
6
30.67
7
30.00
8
30.00
9
30.55
10
31.60
11
33.09
12
35.00
Complete all of the cells in the table above, which represents the cost data for an individual firm in perfect competition. All cost data is in dollar terms.
A. Suppose that, in addition to the information in the table above, the market price is $32.00. Given that the firm is a profit maximizer?
a. What is the optimal level of output?
b. What is the firm’s total revenue?
c. What is the firm’s total cost?
d. What is the profit or loss of the firm?
B. Again using the data above, suppose the market price declines to $13.00.
a. What is the optimal level of output for the firm?
b. What is the profit of the firm?
Total Product
Total Costs
Average Total Costs
Average Variable Costs
Marginal Cost
0
100.00
1
117.00
2
66.00
3
48.33
4
39.25
5
34.00
6
30.67
7
30.00
8
30.00
9
30.55
10
31.60
11
33.09
12
35.00
Explanation / Answer
A.
In perfect competition, profit can be maximized when,
Price = MR = AR = MC
B.
a.
At $13 price, firm is not able to recover its variable cost at any level of production. Thus, firm will shut down rather going for the production.
b.
Firm will shut down. Thus, no profit will be earned.
Total Product Total Costs Average Total Costs Average Variable Costs Marginal Cost 0 100 1.00 117.00 117.00 17.00 17.00 2.00 132.00 66.00 16.00 15.00 3.00 144.99 48.33 15.00 12.99 4.00 157.00 39.25 14.25 12.01 5.00 170.00 34.00 14.00 13.00 6.00 184.02 30.67 14.00 14.02 7.00 210.00 30.00 15.71 25.98 8.00 240.00 30.00 17.50 30.00 9.00 274.95 30.55 19.44 34.95 10.00 316.00 31.60 21.60 41.05 11.00 363.99 33.09 24.00 47.99 12.00 420.00 35.00 26.67 56.01