A purely competitive firm finds that the market price for its product is $25.00.

Question

A purely competitive firm finds that the market price for its product is $25.00. It has a fixed cost of $100.00 and a variable cost of $17.50 per unit for the first 50 units and then $30.00 per unit for all successive units.

Does price exceed average variable cost for the first 50 units?

What is the average variable cost for the first 50 units?

What is the average variable cost for the first 100 units?

What is the marginal cost per unit for the first 50 unit_____per unit for the first 50 units.

What is the marginal cost for units 51 and higher? ____per unit for subsequent units.

For each of the first 50 units, does MR exceed MC?

For the units 51 and higher does MR exceed MC?

What output level will yield the largest possible profit for this purely competitive firm?

Producing _____ units will maximize profit.

***If someone could do each part of the question, or give me a formula or big tip on how to finish the problem that would be great

Explanation / Answer

(1) For first 50 units, Price = $25 and AVC = $17.50. Therefore, price exceeds AVC.

(2) AVC for first 5 units = $17.50

(3) Total variable cost (TVC) for first 100 units = $17.5 x 50 + $30 x 50 = $875 + $1500 = $2375

AVC for first 100 units = $2375 / 100 = $23.75

(4) Marginal cost (MC) per unit for first 50 units = AVC for first 50 units = $17.50

(5) MC per unit for 51 units and higher = $30

NOTE: As per Chegg Answering Policy, first 5 questions are answered.

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