The market is perfectly competitive and there are 1,000 firms that produce paper. A table below sets out the market demand schedule for paper and cost schedule for paper producing firm when it uses its least-cost plant.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Question 16
The market is perfectly competitive and there are 1,000 firms that produce paper. A table below sets out the market demand
schedule for paper and cost schedule for paper producing firm when it uses its least-cost plant.
Price
(dollars per
box)
5.50lei
6.80
8.10
9.40
10.70
Market Quantity
demanded (boxes
per week)
400,000
350,000
300,000
270,000
240,000
Each Firm's
Output
(boxes per
week)
210
230
250
270
290
Marginal cost
(dollars per
additional box)
b) What is the number of firms in the long run?
6.00
7.20
8.10
9.40
12.40
Average
variable cost
(dollars per
box)
6.50
6.40
6.60
7.50
9.00
Average
total cost
(dollars per
box)
11.00
9.20
8.10
8.90
10.20
a) Would firms make economic profit or incur economic loss in the short run? Explain why and calculate the total economic
profit or economic loss.
Transcribed Image Text:Question 16 The market is perfectly competitive and there are 1,000 firms that produce paper. A table below sets out the market demand schedule for paper and cost schedule for paper producing firm when it uses its least-cost plant. Price (dollars per box) 5.50lei 6.80 8.10 9.40 10.70 Market Quantity demanded (boxes per week) 400,000 350,000 300,000 270,000 240,000 Each Firm's Output (boxes per week) 210 230 250 270 290 Marginal cost (dollars per additional box) b) What is the number of firms in the long run? 6.00 7.20 8.10 9.40 12.40 Average variable cost (dollars per box) 6.50 6.40 6.60 7.50 9.00 Average total cost (dollars per box) 11.00 9.20 8.10 8.90 10.20 a) Would firms make economic profit or incur economic loss in the short run? Explain why and calculate the total economic profit or economic loss.
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