Assume that the following cost data are for a purely competitive producer Total

Question

Assume that the following cost data are for a purely competitive producer Total Product Average FixedAverage Marginal Cost 0.00 45.00$ 105.00S 0.00 6000$ 45.00 2S 30.00$ 4 50 $ 40.00 $ 37.50$ 37.00 $ 37.50 $ 38.57 40.63 S 7250 6000 s 35.00 5250S 9.00S 35.00 47.50 S 7145.00 48.13 S 5000$ 52.50$ 40.00 20.00 S 1500 $ 2.00$ 10.00 S 8.57 S 7.50 $ 667 43.33 6.00 S 30.00 40.00 55,00 10 46.50 S 75.00 Answer the questions in the first column in the table below for the price listed at the top of each of the other three columns instructions: if you are entering any negative numbers be sure to include a negative sign in front of those numbers Select Not applicable" and enter a value of "D" for output if the firm does not produce At a product price of $67.00 At a product price of $42.00 At a product price of $33.00 (Click to select dickto select) Will this firm produce in the short run? (Click to select) Click to select) . (Click to select) output lo ' (Click to select) , If it is preferable to produce, what will be the profit- maximizing or loss-minimizing output? units output units output units per firm per firm per firm 1 Click to select) (Click to select)" (Click to select) per unit $ What economic profit or loss will the firm realize per unit of per unit $

Explanation / Answer

price = $67 price =$42 Price =$33 Will firm produce Yes Yes No Profit maximizing output 9 6 0 Economic Profit/Loss (67-50)*9=108 (42-47.50)*6 = -33 0 d) Supply Price Quantity supplied by single firm Profit Quantity supplied by 1500 firms 23 0 0 0 28 0 0 0 33 0 0 0 39 5 -50 7500 44 6 -21 9000 48 7 6.02 10500 58 8 78.96 12000 Equilibrium price is where market demand = market supply. P* = $48. Industry output at equilibrium = 10500 Each firm produces = 10500/1500 =7 profit per unit = (P-ATC )= 48-47.14 =$0.86 profit per firm = 0.86*7 = 6.02 Industry will contract because as output increases price will go down and so does the profits . Therefore firms will exit.

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