Firm B operates in a perfectly competitive market. Use the graph below to answer
ID: 1209528 • Letter: F
Question
Firm B operates in a perfectly competitive market. Use the graph below to answer the following and determine what should this firm do in the short-run and in the long-run?
Price (P)=
Average Variable Cost (AVC)=
Profit maximizing Quantity (Q) =
Total Variable Cost (TVC)=
Total Revenue (TR) =
Total Fixed Cost (TFC) =
Average Total Cost (ATC) =
Profit/Loss =
Total Cost (TC)=
Operating Profit =
Price (P)=
Average Variable Cost (AVC)=
Profit maximizing Quantity (Q) =
Total Variable Cost (TVC)=
Total Revenue (TR) =
Total Fixed Cost (TFC) =
Average Total Cost (ATC) =
Profit/Loss =
Total Cost (TC)=
Operating Profit =
Explanation / Answer
Price (P)= 7 according to demand curve
Average Variable Cost (AVC)= 6 according to AVC curve
Profit maximizing Quantity (Q) = 150 where MR = MC
Total Variable Cost (TVC)= AVC x Q = 6 x 150 => 900
Total Revenue (TR) = PxQ = 7 x 150 = 1050
Total Fixed Cost (TFC) = TC - TVC => 1650 - 900 = 750
Average Total Cost (ATC) = 11 according to ATC curve
Profit/Loss = TR - TC = 1050 - 1650 = -600 is loss
Total Cost (TC) = Cx Q => 11 x 150 =1650
Operating Profit = TR - TVC = 1050 - 900 = 150
Price (P)= 7 according to demand curve
Average Variable Cost (AVC)= 6 according to AVC curve
Profit maximizing Quantity (Q) = 150 where MR = MC
Total Variable Cost (TVC)= AVC x Q = 6 x 150 => 900
Total Revenue (TR) = PxQ = 7 x 150 = 1050
Total Fixed Cost (TFC) = TC - TVC => 1650 - 900 = 750
Average Total Cost (ATC) = 11 according to ATC curve
Profit/Loss = TR - TC = 1050 - 1650 = -600 is loss
Total Cost (TC) = Cx Q => 11 x 150 =1650
Operating Profit = TR - TVC = 1050 - 900 = 150
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