The table below shows the average cost (AC) for a purely competitive market. The average revenue (AR) is constant at RM5 per unit and the firm’s total fixed cost (TFC) is RM4.If the average revenue falls to RM3 per unit, calculate the firm’s new profit or loss at the equilibrium. Based on your answer, should the firm continue or stop the production? Justify.Output (Units)Total Revenue (RM)Average Cost (RM)Total Cost (RM)Marginal Cost (RM)Marginal Revenue (RM)1 8.0 2 5.5 3 4.0 4 3.5 5 3.8 6 4.5 7 6.0 Total RevenueAverage Cost(RM)Total CostMarginal Cost(RM)MarginalRevenue (RM)Output(Units)(RM)(RM)18.025.534.043.53.864.576.0Fill in the values for total revenue (TR), total cost (TC) and marginal cost (MC) in the columnprovided.

Average cost is the total cost divided by quantity of output. e,g. If the total cost is 48$ for 8…

Answered: ur answer, should the firm continue or…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The table below shows the average cost (AC) for a purely competitive market. The average revenue (AR) is constant at RM5 per unit and the firm’s total fixed cost (TFC) is RM4.

If the average revenue falls to RM3 per unit, calculate the firm’s new profit or loss at the equilibrium. Based on your answer, should the firm continue or stop the production? Justify.

Output (Units)	Total Revenue (RM)	Average Cost (RM)	Total Cost (RM)	Marginal Cost (RM)	Marginal Revenue (RM)
1		8.0
2		5.5
3		4.0
4		3.5
5		3.8
6		4.5
7		6.0

Total Revenue
Average Cost
(RM)
Total Cost
Marginal Cost
(RM)
Marginal
Revenue (RM)
Output
(Units)
(RM)
(RM)
1
8.0
2
5.5
3
4.0
4
3.5
3.8
6
4.5
7
6.0
Fill in the values for total revenue (TR), total cost (TC) and marginal cost (MC) in the column
provided.

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