Answer choices for the last two questions- The firm will: earn zero profit, suff

Question

Answer choices for the last two questions-
The firm will: earn zero profit, suffer an economic loss of $18, suffer an economic loss of $2, earn a profit of $2
4. Understanding excess capacity The following table showes the daily cost data and demand schedule for a typical firm producing board games in a monopolistically competitive market in the short run. Fill in the values in the Marginal Cost, Total Revenue, and Marginal Revenue columns in the following table and then answer the questions that follow Total Cost Marginal venueRevenue Average Total Cost Marginal Cost Total Re Quantity (Board games) Price (Dollars er(ollars) (Dollars)(Dollars) game) (Dollars) 10.00 9.00 8.00 6.00 4.00 3.00 2.00 1.00 17 20 27 32 35 48 56 board games at a price of per board game in the Under monopolistic competition, a typical firm wall produce short run. Based on your calculations, the firm will Fill in the Average Total Cost column in the previous table Based on your calculations, the leval of excess capacity in this monopolistically competitive market is

Explanation / Answer

Answer : Table showing information :

Under monopolistic Competition typical firm will produce 2 units of board games at price of $9 per unit of board games.

Based on this calculation the firm is earning a short run economic loss of $2 .

Loss = (ATC- P) × Q = ( 10-9)× 2 =$2

Based on your calculation the level of excess capacity is that where The firm produce maximum quantity where ATC=MC . The maximum capacity of typical firm is 7 board games and produces 2 board games in short run. So the excess capacity of board games is (7-2) =5 board games.

Qty P TC MC TR MR ATC P/L 1 10 17 - 10 - 17 -7 2 9 20 3 18 8 10 -2 3 8 27 7 24 6 9 -3 4 6 32 5 24 0 8 -8 5 4 35 3 20 -4 7 -15 6 3 48 13 18 -2 8 -20 7 2 56 8 14 -4 8 -42 8 1 64 8 8 -6 8 -56

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