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(Solution Library) Assume the following cost data are for a purely competitive producer: Total Product Average fixed cost Average variable cost Average

Question: Assume the following cost data are for a purely competitive producer:

Total
Product 		Average
fixed
cost 		Average
variable
cost 		Average
total
cost 		Marginal
cost
0
1
2
3
4
5
6
7
8
9
10 		$60.00
30.00
20.00
15.00
12.00
10.00
8.57
7.50
6.67
6.00 		$45.00
42.50
40.00
37.50
37.00
37.50
38.57
40.63
43.33
46.50 		$105.00
72.50
60.00
52.50
49.00
47.50
47.14
48.13
50.00
52.50 		$45
40
35
30
35
40
45
55
65
75
  1. At a product price of $56, will this firm produce in the short run? Why or why not? If it is preferable to produce, what will be the profit maximizing or
    loss minimizing output? Explain. What economic profit or loss will the firm realize per unit of output?
  2. Answer the relevant questions of 4a assuming product price is $41.
  3. Answer the relevant questions of 4a assuming product price is $32.
  4. In the table below, complete the short-run supply schedule for the firm (columns 1 and 2) and indicate the profit or loss incurred at each output (column 3).

    Price     		(2)
    Quantity
    supplied,
    single firm     		(3)
    Profit (+)
    or loss (l)     		(4)
    Quantity
    supplied,
    1500 firms
    $26
    32
    38
    41
    46
    56
    66     		____
    ____
    ____
    ____
    ____
    ____
    ____     		$____
    ____
    ____
    ____
    ____
    ____
    ____     		____
    ____
    ____
    ____
    ____
    ____
    ____
  5. Explain: That segment of a competitive firm’s marginal cost curve which lies above its average‘s variable cost curve constitutes the short run supply curve for the firm. Illustrate graphically.
  6. Now assume there are 1500 identical firms in this competitive industry; that is, there are 1500 firms, each of which has the same cost data as shown here. Calculate the industry supply schedule (column 4).
  7. Suppose the market demand data for the product are as follows:
Price Total
quantity
demanded
$26
32
38
41
46
56
66 		17,000
15,000
13,500
12,000
10,500
9,500
8,000

What will be the equilibrium price? What will be the equilibrium output for the industry? For each firm? What will profit or loss be per unit? Per firm? Will this industry expand or contract in the long run?

Price: $2.99
Solution: The downloadable solution consists of 5 pages
Deliverable: Word Document


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