A firm is producing 200 units of its product. At this level of output the AVC=$2

Q: A firm is producing 200 units of its product. At this level of output the AVC=$2

A. Fixed cost = ATC - AVC = $70- $20 = $50 B. TR = 100*200 = 20000 TC= 70*200 = 14000 So, it is operating with a profit of 6000

ID: 1201377 • Letter: A

Question

A firm is producing 200 units of its product. At this level of output the AVC=$20, and the ATC=$70. The firm is a price taker and the price for its product is $100. Assuming that the firm is maximizing profits and that labor is the only variable input. From this information:

a. What are the fixed costs of the firm?

b. What are the profits or losses?

c. What are the rents, if any?

d. Show your results in (b) and (c) in a graph on the graph paper provided.

e. What will happen in this industry in the long-run? Explain.

Show all your work.

Explanation / Answer

Fixed cost = ATC - AVC = $70- $20 = $50

TR = 100*200 = 20000

TC= 70*200 = 14000

So, it is operating with a profit of 6000

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A firm is producing 200 units of its product. At this level of output the AVC=$2

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