### 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?
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