2) Suppose Lois Lane sells peaches in a perfectly competitive market. Her output

Question

2) Suppose Lois Lane sells peaches in a perfectly competitive market. Her output per day and her costs are as follows. Suppose the current equilibrium market price for 1 lb of peaches is $10. a. Fill in the gaps in the following table for Lois Lane's peach farm Answer: (8 points) AVC MC MR AFC TFC 20 ATC TC Q, lbs 0 unde- 20 undefined undefined undefinedundefined fined 12 12 12 8.5 9.33 10.25 32 37 48 61 75 92 113 136 20 20 20 20 20 20 20 20 32 18.5 16 15.25 15 15.33 16.14 17 20 10 6.67 5 4 3.33 2.86 2.5 5 2 4 5 6 12 13.28 14.5 13 14 17 21 23 8

Explanation / Answer

MR will be constant value= $10. The reason behind is that in a perfectly competitive market the price remains the same irrespective of the level of output. So MR=$10 at all levels of output. THe MR in the below table has been calculated by(CHnage in TR/Change in Q. The tabele is for your understanding that the MR is always equal to price in perfectly comepetitive market and constant.

Q P TR MR 0 10 0 1 10 10 10 2 10 20 10 3 10 30 10 4 10 40 10 5 10 50 10 6 10 60 10 7 10 70 10 8 10 80 10

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