### Cost Structure of a Firm in a Purely Competitive IndustryIn a purely competitive market, firms typically have no fixed costs, meaning the average total cost (ATC) is equivalent to the average variable cost (AVC). Consider the cost structure below for a representative firm:#### Cost Table| Quantity | Average Total Cost | Marginal Cost ||----------|--------------------|---------------|| 1 | $16.00 | - || 2 | $15.00 | $14.00 || 3 | $13.00 | $9.00 || 4 | $18.75 | $36.00 || 5 | $57.00 | $210.00 || 6 | $123.50 | $370.00 |#### Analysis Questiona. **Long-Run Price Expectation:**Given only the information available, what would you expect the product price to be in the long run?- $9.00- $13.00- $18.75- $14.00b. **Short-Run Price Expectation:**What would you expect the price to be in the short run?- $12.00- $10.00- $9.00- $14.00Use the cost table and your understanding of purely competitive markets to determine the price expectations in the short and long term. Consider that in the long run, firms will enter or exit the market until price equals the minimum average total cost.

In a perfect competition market, a firm cannot enjoy the same profit level in the short-run and…

Consider the following costs of a typical firm in a purely competitive industry. The firm has no fixed costs (average total cost = average variable cost). Average Total Cost Quantity Marginal Cost 1 $16.00 15.00 $14.00 3 13.00 9.00 4 18.75 36.00 57.00 210.00 6. 123.50 370.00 a. Given only the information available, what would you expect product price to be in the long run? O $9.00 O $13.00 O $18.75 O $14.00 b. What would you expect price to be in the short run? O $12.00 O $10.00 O $9.00 O $14.00

Consider the following costs of a typical firm in a purely competitive industry. The firm has no fixed costs (average total cost = average variable cost). Average Total Cost Quantity Marginal Cost 1 $16.00 15.00 $14.00 3 13.00 9.00 4 18.75 36.00 57.00 210.00 6. 123.50 370.00 a. Given only the information available, what would you expect product price to be in the long run? O $9.00 O $13.00 O $18.75 O $14.00 b. What would you expect price to be in the short run? O $12.00 O $10.00 O $9.00 O $14.00

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the following costs of a typical firm in a purely competitive industry. The firm has no fixed cost given only the available information, what would you except product price to be in the long run?
20) - Google Chrome "mod/quiz/attempt.php?attempt%3=1579003&cmid%3812962&page%3D2 em (Academic 20- MC ATC AVC 16 4. 5 10 15 20 25 30 35 40 45 50 Quantity (units per day) The above figure shows the cost curves for a perfectly competitive firm. If all firms in the market have th same cost curves and the price equals $16 per unit Select one: O a. over time, the price will fall as new firms enter the market. O b. over time, firms will leave this market. O c. the market is in its long-run equilibrium. O d. the firm is making zero economic profit. o search hp Price and cost (dollars per unit)
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Refer to the diagram to the right which shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. What is the amount of its total fixed cost? OA. $1,000 B. $1,440 OC. $2,520 OD. It cannot be determined. Price and cost (5) 40.50 36.00 30.00 28.00 130 180 Quantity MC 240 ATC AVC MR
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Table Cost.EX2: Costs and Outputs for a Competitive Firm Total Total Output Fixed Variable (Q) Costs (TFC) Costs (TVC) $40.00 $0.00 $40.00 $40.00 4 $40.00 $90.00 9. $40.00 $130.00 8. $40.00 $190.00 10 $40.00 $260.00 Refer to Table Cost.EX2. For 8 units, the average total cost is about O $23.75 O $26.75 O $30.00 $28.75
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