The following table refers to a perfectly competitive firm. Q (units) TVC $ TFC $ TC $ MC ($) AVC $ ATC $ 0 0 60 60 1 65 60 125 2 120 60 180 3 160 60 220 4 190 60 250 5 250 60 310 6 320 60 380 7 400 60 REQUIRED PART A Copy and complete the above table in your examination booklet. Round off values to the nearest two decimal places.
The following table refers to a
|
Q (units) |
TVC $ |
TFC $ |
TC $ |
MC ($) |
|
|
|
0 |
0 |
60 |
60 |
|
|
|
|
1 |
65 |
60 |
125 |
|
|
|
|
2 |
120 |
60 |
180 |
|
|
|
|
3 |
160 |
60 |
220 |
|
|
|
|
4 |
190 |
60 |
250 |
|
|
|
|
5 |
250 |
60 |
310 |
|
|
|
|
6 |
320 |
60 |
380 |
|
|
|
|
7 |
400 |
60 |
|
|
|
|
REQUIRED
PART A
Copy and complete the above table in your examination booklet. Round off values to the nearest two decimal places.
PART B
For each of the prices below, determine the firm’s profit-maximising (optimal) level of output in the short run and calculate the profit or loss. Show your calculations and explain your answer.
- P = $39
QUESTION ONE, PART B continued
- P = $70
PART C
- i) Discuss why the demand curve facing an industry (i.e., a market) under perfect competition is downward sloping but the demand curve facing each firm is horizontal. In your answer include why the perfectly competitive firm’s demand curve = the
equilibrium price of the product = marginal revenue for the product
- ii) Briefly discuss, a condition under which a perfectly competitive firm will choose to stay in business even though it does not earn (positive) economic profits.
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b)For each of the prices below, determine the firm’s profit-maximising (optimal) level of output in the short run and calculate the profit or loss. Show your calculations and explain your answer.
- P = $39
2.P = $70
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