Assume that the cost data in the following table are for a purely competitive producer: Total Product Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost 0 1 $ 60.00 $ 45.00 $ 105.00 $ 45.00 2 30.00 42.50 72.50 40.00 3 20.00 40.00 60.00 35.00 4 15.00 37.50 52.50 30.00 5 12.00 37.00 49.00 35.00 6 10.00 37.50 47.50 40.00 7 8.57 38.57 47.14 45.00 8 7.50 40.63 48.13 55.00 9 6.67 43.33 50.00 65.00 10 6.00 46.50 52.50 75.00 a. At a product price of $56.00 (i) Will this firm produce in the short run? yes (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? profit- maximizing output = 9 units per firm (iii) What economic profit or loss will the firm realize per unit of output? Profit per unit = $ 16 b. At a product price of $41.00 (i) Will this firm produce in the short run? Yes (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? Loss-minimzing output = 6 units per firm (iii) What economic profit or loss will the firm realize per unit of output? Loss per unit = $ 39 c. At a product price of $32.00 (i) Will this firm produce in the short run? No (ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? Not applicable output = 0 units per firm (iii) What economic profit or loss will the firm realize per unit of output? Total loss per unit = $ 0 d. In the table below, complete the short-run supply schedule for the firm (columns 1 and 2) and indicate the profit or loss incurred at each output (column 3). (1) Price (2) Quantity Supplied, Single Firm (3) Profit (+) or Loss (−) (4) Quantity Supplied, 1,500 Firms $26.00 0.00 -60.00 0.00 32.00 0.00 -60.00 0.00 38.00 0.00 -60.00 0.00 41.00 5.00 -55.00 75,000.00 46.00 6.00 9,000.00 56.00 7.00 10,500.00 66.00 8.00 12,000.00 e. Now assume that there are 1,500 identical firms in this competitive industry. That is, there are 1,500 firms, each of which has the cost data shown in the table. Complete the industry supply schedule (column 4 in the table above). f. Suppose the market demand data for the product are as follows: Price Total Quality Demanded $ 26.00 17,000 32.00 15,000 38.00 13,500 41.00 12,000 46.00 10,500 56.00 9,500 66.00 8,000 What is the equilibrium price? $______ What is the equilibrium output for the industry? ______units For each firm? ______units Instructions: Enter your answers rounded to two decimal places. Enter positive values for profit or loss. What will profit or loss be per unit? _______ per unit = $______ Per firm? $______ Will this industry expand or contract in the long run? ________ Prev Question 9 of 16 Total9 of 16 Visit question mapNext
Assume that the cost data in the following table are for a purely competitive producer:
| Total Product |
Average Fixed Cost |
Average Variable Cost |
Average Total Cost |
Marginal Cost |
|---|---|---|---|---|
| 0 | ||||
| 1 | $ 60.00 | $ 45.00 | $ 105.00 | $ 45.00 |
| 2 | 30.00 | 42.50 | 72.50 | 40.00 |
| 3 | 20.00 | 40.00 | 60.00 | 35.00 |
| 4 | 15.00 | 37.50 | 52.50 | 30.00 |
| 5 | 12.00 | 37.00 | 49.00 | 35.00 |
| 6 | 10.00 | 37.50 | 47.50 | 40.00 |
| 7 | 8.57 | 38.57 | 47.14 | 45.00 |
| 8 | 7.50 | 40.63 | 48.13 | 55.00 |
| 9 | 6.67 | 43.33 | 50.00 | 65.00 |
| 10 | 6.00 | 46.50 | 52.50 | 75.00 |
a. At a product
(i) Will this firm produce in the short run? yes
(ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output?
profit- maximizing
output = 9 units per firm
(iii) What economic profit or loss will the firm realize per unit of output? Profit per unit = $ 16
b. At a product price of $41.00
(i) Will this firm produce in the short run? Yes
(ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output?
Loss-minimzing
output = 6 units per firm
(iii) What economic profit or loss will the firm realize per unit of output?
Loss per unit = $ 39
c. At a product price of $32.00
(i) Will this firm produce in the short run? No
(ii) If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? Not applicable
output = 0 units per firm
(iii) What economic profit or loss will the firm realize per unit of output? Total loss per unit = $ 0
d. In the table below, complete the short-run supply schedule for the firm (columns 1 and 2) and indicate the profit or loss incurred at each output (column 3).
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e. Now assume that there are 1,500 identical firms in this competitive industry. That is, there are 1,500 firms, each of which has the cost data shown in the table. Complete the industry supply schedule (column 4 in the table above).
f. Suppose the market demand data for the product are as follows:
| Price | Total Quality Demanded |
|---|---|
| $ 26.00 | 17,000 |
| 32.00 | 15,000 |
| 38.00 | 13,500 |
| 41.00 | 12,000 |
| 46.00 | 10,500 |
| 56.00 | 9,500 |
| 66.00 | 8,000 |
What is the
What is the equilibrium output for the industry? ______units
For each firm? ______units
Instructions: Enter your answers rounded to two decimal places. Enter positive values for profit or loss.
What will profit or loss be per unit? _______ per unit = $______
Per firm? $______
Will this industry expand or contract in the long run? ________
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