The following table shows cost data for a perfectly competitive firm:| Output | Average Fixed Cost | Average Variable Cost | Average Total Cost | Marginal Cost ||--------|---------------------|------------------------|---------------------|---------------|| 1 | $500 | $120 | $620 | $120 || 2 | 250 | 108 | 358 | 95 || 3 | 167 | 97 | 263 | 75 || 4 | 125 | 88 | 213 | 60 || 5 | 100 | 81 | 181 | 55 || 6 | 83 | 78 | 161 | 60 || 7 | 71 | 78 | 149 | 80 || 8 | 63 | 81 | 144 | 105 || 9 | 56 | 87 | 143 | 135 || 10 | 50 | 96 | 146 | 170 |If the product price is $105, the profit-maximizing output is:The table outlines the various cost metrics for a firm at different output levels. It includes:- **Average Fixed Cost (AFC)**: This decreases as output increases.- **Average Variable Cost (AVC)**: This generally shows slight variations.- **Average Total Cost (ATC)**: Calculated as AFC plus AVC.- **Marginal Cost (MC)**: Fluctuates at different production levels.To maximize profits, the firm should produce the quantity where the product price ($105) equals the marginal cost (MC).

Abbreviations;- AFC = Average Fixed Cost AVC = Average Variable Cost ATC = Average Total Cost MC = Marginal Cost Output AFC AVC ATC MC 1 500 120 620 120 2 250 108 358 95 3 167 97 263 75 4 125 88 213 60 5 100 81 181 55 6 83 78 161 60 7 71 78 149 80 8 63 81 144 105 9 56 87 143 135 10 50 96 146 170Profit Maximization Condition is achieved where MR = MC MC should be Rising To Calculate MR we need to first Calculate TR and then we are able to calculate MR TR = Price*Output MR = (Change in TR/Change in output) Output AFC AVC ATC MC P TR MR 1 500 120 620 120 105 105 2 250 108 358 95 105 210 105 3 167 97 263 75 105 315 105 4 125 88 213 60 105 420 105 5 100 81 181 55 105 525 105 6 83 78 161 60 105 630 105 7 71 78 149 80 105 735 105 8 63 81 144 105 105 840 105 9 56 87 143 135 105 945 105 10 50 96 146 170 105 1050 105According to the above table, we clearly see that the Profit maximization Output is 8 Units, As it satisfies both the conditions of MR = MC and MC should be rising.

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The following table shows cost data for a perfectly competitive firm. Output 1 2 3 4 5 6 7 8 9 10 Average Fixed Average Variable Average Total Cost $500 250 167 125 100 83 71 63 56 50 Cost $120 108 97 88 81 78 78 81 87 96 If the product price is $105, the profit-maximizing output is Cost $620 358 263 213 181 161 149 144 143 146 Marginal Cost $120 95 75 60 55 60 80 105 135 170

The following table shows cost data for a perfectly competitive firm. Output 1 2 3 4 5 6 7 8 9 10 Average Fixed Average Variable Average Total Cost $500 250 167 125 100 83 71 63 56 50 Cost $120 108 97 88 81 78 78 81 87 96 If the product price is $105, the profit-maximizing output is Cost $620 358 263 213 181 161 149 144 143 146 Marginal Cost $120 95 75 60 55 60 80 105 135 170

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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