1. The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry. Price ($) H2286420 14 12 10 MR=8 10 20 30 MC ATC Quantity (units) a. What price does the firm face in the market? b. At what level of output does the firm maximize profits? c. What is the revenue of the firm when it sells the profit-maximizing level of output? d. What is the total cost of the firm when it produces the profit-maximizing level of output? e. What is the maximum profit that the firm can make? f. Discuss the implications if the level of production is 10. g. Discuss the implications if the price is 2.

1. The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry. Price ($) H2286420 14 12 10 MR=8 10 20 30 MC ATC Quantity (units) a. What price does the firm face in the market? b. At what level of output does the firm maximize profits? c. What is the revenue of the firm when it sells the profit-maximizing level of output? d. What is the total cost of the firm when it produces the profit-maximizing level of output? e. What is the maximum profit that the firm can make? f. Discuss the implications if the level of production is 10. g. Discuss the implications if the price is 2.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. The following figure shows the marginal cost curve and the average total cost
curve of a firm operating in a perfectly competitive industry.
Price ($)
14
12
10
MR =8
6
4
2
10
20
30
MC
ATC
Quantity (units)
a. What price does the firm face in the market?
b. At what level of output does the firm maximize profits?
c. What is the revenue of the firm when it sells the profit-maximizing level of output?
d. What is the total cost of the firm when it produces the profit-maximizing level of
output?
e. What is the maximum profit that the firm can make?
f. Discuss the implications if the level of production is 10.
g. Discuss the implications if the price is 2.

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