Question: Assume that firm X is an operating member of a particular competitive industry, is a profit-maximizer, and sees itself as facing a horizontal demand curve. Assume, too, that its average and total costs of producing various daily outputs is given by the following table:

("Fixed" costs are $120; these costs represent the daily dollar equivalent of the firm's capital outlays at the time of entry for land-and-improvements. All other costs, including the daily dollar equivalent of the investment cost of plant-and-equipment, are "variable.") Please determine the marginal cost schedule implied by the firm's total cost schedule and then answer the following questions.

1. If market price were $9.50, this firm would provide

1. 10 (ii) 12 (iii) 14 (iv) 16 (v) 0 units per day.
   b. At a price of $9.50 after the firm has had time to adjust the rate of production of its plant, the firm would
   1. be in long run equilibrium (defined as a state in which there is neither entry nor exit of new firms)
   2. be in short run equilibrium (defined as a state in which no firm already in the industry wants to change its output subject to the qualification that firms cannot enter the industry and existing firms cannot exit the industry).
   3. not be in equilibrium
      c. The reason for this answer is that at a $9.50 price the firm would be
      (i) operating at a profit
2. operating at a loss
3. maximizing profits (or minimizing losses)
4. in an indeterminate position

d. Assuming no change in cost or market demand conditions, in the long run (as defined above) price would

1. rise (ii) fall (iii) remain the same (iv) be indeterminate
   e. The reason for the answer to question d is that if the industry price were $9.50
   1. new firms would enter the market, or existing ones would expand
   2. some of the existing firms would leave the market
   3. Some firms would enter and others leave the market
   4. no change in the number or size of firms would take place
      f. Under existing cost conditions, when the industry reaches its long rum equilibrium position, price will be
      (i) exactly $9.50
2. more than $9.50 but less than $11.50
3. exactly $11.50
4. more than $11.50

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