The marginal cost and an average cost schedule for the firm

Question

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Answer 1

Question

Chapter 10, Problem 6E

a)

To determine

To calculate: The marginal cost and an average cost schedule for the firm

a)

Expert Solution

Answer to Problem 6E

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST	AVERAGE COST
10	110	-	11
15	150	40	10
20	180	30	9
25	225	45	9
30	300	75	10
35	385	85	11
40	480	95	12

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Marginal cost defines that the extension to the total cost by cause of the increment in one unit of output. Average cost is per unit cost. Total cost is divided by the output to know the average cost.

The following is the marginal and average cost schedule:

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST TCn−TCn−1	AVERAGE COST (TC/Q)
10	110	-	110/10=11
15	150	150−110=40 (40 / 5 =8)	150/15=10
20	180	180−150=30 (30 / 5 =6)	180/20=9
25	225	225−180=45 (45 / 5 =9)	225/25=9
30	300	300−225=75 (75 / 5 =15)	300/30=10
35	385	385−300=85 (85 / 5 =17)	385/35=11
40	480	480−385=95 (95 / 5 =19)	480/40=12

Above schedule depicts the output, total cost, marginal cost and average cost. Marginal cost and average costs schedule have been derived from the output and total cost schedule.

Economics Concept Introduction

Introduction: Marginal cost defined as the production cost that includes all the costs will be vary within that level of the production. Suppose if the firm need to build the new firm to extend to produce the goods and services, the cost of the building firm is called as the marginal cost.

b)

To determine

To calculate: The total number of units will be produced and sold and find the profits per unit and total profits, if the prevailing market price is $17 per unit

b)

Expert Solution

Answer to Problem 6E

The total number of units will be produced and sold is 35

The Profits per unit is $6(17−11)

The total profit is $210

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Let the prevailing market price is $17 per unit.

Explain:

Purely competitive market is characterized by the large number of buyers and sellers. Price is decided by the demand and supply forces. Price is equal to the marginal cost (P=MC).Thus, price and marginal costs are equal at the 35 units of output. A total of 35 units of output will be produced and sold.

Cost per unit is $11 and price per unit is $17.Thus, Profit per unit is $6(17−11) .The following is the total profit (TP).

TP=TR−TC

=17×35−35×11

=595−385

=210

Economics Concept Introduction

Introduction: Market price is one kind of current price in that the asset or service will be purchase or sale. In terms of economic theory, marginal cost defined as the point of forces of demand and supply meet.it is the prevailing price on the certain day or a certain time.

c)

To determine

To describe: The industry in long-run equilibrium at the given price.

c)

Expert Solution

Answer to Problem 6E

Firm is not in long-run equilibrium and also firm gets only normal in long-run purely competitive market.

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Purely competitive market is characterized by the large number of buyers and sellers in the market. Price is decided by the demand and supply forces in the market. Firm earns the abnormal profit at this price and more firms would be attracted toward the market. Abnormal profit would be withered away. Now each firm would be earning normal profit.

Economics Concept Introduction

Introduction: When long run equilibrium occur, that time the marginal revenue equals to the marginal costs to be also equal to the average total costs. This type of equilibrium will be appeared in perfectly competitive market.

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Answer 2

Question

Chapter 10, Problem 6E

a)

To determine

To calculate: The marginal cost and an average cost schedule for the firm

a)

Expert Solution

Answer to Problem 6E

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST	AVERAGE COST
10	110	-	11
15	150	40	10
20	180	30	9
25	225	45	9
30	300	75	10
35	385	85	11
40	480	95	12

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Marginal cost defines that the extension to the total cost by cause of the increment in one unit of output. Average cost is per unit cost. Total cost is divided by the output to know the average cost.

The following is the marginal and average cost schedule:

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST TCn−TCn−1	AVERAGE COST (TC/Q)
10	110	-	110/10=11
15	150	150−110=40 (40 / 5 =8)	150/15=10
20	180	180−150=30 (30 / 5 =6)	180/20=9
25	225	225−180=45 (45 / 5 =9)	225/25=9
30	300	300−225=75 (75 / 5 =15)	300/30=10
35	385	385−300=85 (85 / 5 =17)	385/35=11
40	480	480−385=95 (95 / 5 =19)	480/40=12

Above schedule depicts the output, total cost, marginal cost and average cost. Marginal cost and average costs schedule have been derived from the output and total cost schedule.

Economics Concept Introduction

Introduction: Marginal cost defined as the production cost that includes all the costs will be vary within that level of the production. Suppose if the firm need to build the new firm to extend to produce the goods and services, the cost of the building firm is called as the marginal cost.

b)

To determine

To calculate: The total number of units will be produced and sold and find the profits per unit and total profits, if the prevailing market price is $17 per unit

b)

Expert Solution

Answer to Problem 6E

The total number of units will be produced and sold is 35

The Profits per unit is $6(17−11)

The total profit is $210

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Let the prevailing market price is $17 per unit.

Explain:

Purely competitive market is characterized by the large number of buyers and sellers. Price is decided by the demand and supply forces. Price is equal to the marginal cost (P=MC).Thus, price and marginal costs are equal at the 35 units of output. A total of 35 units of output will be produced and sold.

Cost per unit is $11 and price per unit is $17.Thus, Profit per unit is $6(17−11) .The following is the total profit (TP).

TP=TR−TC

=17×35−35×11

=595−385

=210

Economics Concept Introduction

Introduction: Market price is one kind of current price in that the asset or service will be purchase or sale. In terms of economic theory, marginal cost defined as the point of forces of demand and supply meet.it is the prevailing price on the certain day or a certain time.

c)

To determine

To describe: The industry in long-run equilibrium at the given price.

c)

Expert Solution

Answer to Problem 6E

Firm is not in long-run equilibrium and also firm gets only normal in long-run purely competitive market.

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Purely competitive market is characterized by the large number of buyers and sellers in the market. Price is decided by the demand and supply forces in the market. Firm earns the abnormal profit at this price and more firms would be attracted toward the market. Abnormal profit would be withered away. Now each firm would be earning normal profit.

Economics Concept Introduction

Introduction: When long run equilibrium occur, that time the marginal revenue equals to the marginal costs to be also equal to the average total costs. This type of equilibrium will be appeared in perfectly competitive market.

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Answer 3

Question

Chapter 10, Problem 6E

a)

To determine

To calculate: The marginal cost and an average cost schedule for the firm

a)

Expert Solution

Answer to Problem 6E

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST	AVERAGE COST
10	110	-	11
15	150	40	10
20	180	30	9
25	225	45	9
30	300	75	10
35	385	85	11
40	480	95	12

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Marginal cost defines that the extension to the total cost by cause of the increment in one unit of output. Average cost is per unit cost. Total cost is divided by the output to know the average cost.

The following is the marginal and average cost schedule:

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST TCn−TCn−1	AVERAGE COST (TC/Q)
10	110	-	110/10=11
15	150	150−110=40 (40 / 5 =8)	150/15=10
20	180	180−150=30 (30 / 5 =6)	180/20=9
25	225	225−180=45 (45 / 5 =9)	225/25=9
30	300	300−225=75 (75 / 5 =15)	300/30=10
35	385	385−300=85 (85 / 5 =17)	385/35=11
40	480	480−385=95 (95 / 5 =19)	480/40=12

Above schedule depicts the output, total cost, marginal cost and average cost. Marginal cost and average costs schedule have been derived from the output and total cost schedule.

Economics Concept Introduction

Introduction: Marginal cost defined as the production cost that includes all the costs will be vary within that level of the production. Suppose if the firm need to build the new firm to extend to produce the goods and services, the cost of the building firm is called as the marginal cost.

b)

To determine

To calculate: The total number of units will be produced and sold and find the profits per unit and total profits, if the prevailing market price is $17 per unit

b)

Expert Solution

Answer to Problem 6E

The total number of units will be produced and sold is 35

The Profits per unit is $6(17−11)

The total profit is $210

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Let the prevailing market price is $17 per unit.

Explain:

Purely competitive market is characterized by the large number of buyers and sellers. Price is decided by the demand and supply forces. Price is equal to the marginal cost (P=MC).Thus, price and marginal costs are equal at the 35 units of output. A total of 35 units of output will be produced and sold.

Cost per unit is $11 and price per unit is $17.Thus, Profit per unit is $6(17−11) .The following is the total profit (TP).

TP=TR−TC

=17×35−35×11

=595−385

=210

Economics Concept Introduction

Introduction: Market price is one kind of current price in that the asset or service will be purchase or sale. In terms of economic theory, marginal cost defined as the point of forces of demand and supply meet.it is the prevailing price on the certain day or a certain time.

c)

To determine

To describe: The industry in long-run equilibrium at the given price.

c)

Expert Solution

Answer to Problem 6E

Firm is not in long-run equilibrium and also firm gets only normal in long-run purely competitive market.

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Purely competitive market is characterized by the large number of buyers and sellers in the market. Price is decided by the demand and supply forces in the market. Firm earns the abnormal profit at this price and more firms would be attracted toward the market. Abnormal profit would be withered away. Now each firm would be earning normal profit.

Economics Concept Introduction

Introduction: When long run equilibrium occur, that time the marginal revenue equals to the marginal costs to be also equal to the average total costs. This type of equilibrium will be appeared in perfectly competitive market.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 10, Problem 6E

a)

To determine

To calculate: The marginal cost and an average cost schedule for the firm

a)

Expert Solution

Answer to Problem 6E

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST	AVERAGE COST
10	110	-	11
15	150	40	10
20	180	30	9
25	225	45	9
30	300	75	10
35	385	85	11
40	480	95	12

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Marginal cost defines that the extension to the total cost by cause of the increment in one unit of output. Average cost is per unit cost. Total cost is divided by the output to know the average cost.

The following is the marginal and average cost schedule:

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST TCn−TCn−1	AVERAGE COST (TC/Q)
10	110	-	110/10=11
15	150	150−110=40 (40 / 5 =8)	150/15=10
20	180	180−150=30 (30 / 5 =6)	180/20=9
25	225	225−180=45 (45 / 5 =9)	225/25=9
30	300	300−225=75 (75 / 5 =15)	300/30=10
35	385	385−300=85 (85 / 5 =17)	385/35=11
40	480	480−385=95 (95 / 5 =19)	480/40=12

Above schedule depicts the output, total cost, marginal cost and average cost. Marginal cost and average costs schedule have been derived from the output and total cost schedule.

Economics Concept Introduction

Introduction: Marginal cost defined as the production cost that includes all the costs will be vary within that level of the production. Suppose if the firm need to build the new firm to extend to produce the goods and services, the cost of the building firm is called as the marginal cost.

b)

To determine

To calculate: The total number of units will be produced and sold and find the profits per unit and total profits, if the prevailing market price is $17 per unit

b)

Expert Solution

Answer to Problem 6E

The total number of units will be produced and sold is 35

The Profits per unit is $6(17−11)

The total profit is $210

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Let the prevailing market price is $17 per unit.

Explain:

Purely competitive market is characterized by the large number of buyers and sellers. Price is decided by the demand and supply forces. Price is equal to the marginal cost (P=MC).Thus, price and marginal costs are equal at the 35 units of output. A total of 35 units of output will be produced and sold.

Cost per unit is $11 and price per unit is $17.Thus, Profit per unit is $6(17−11) .The following is the total profit (TP).

TP=TR−TC

=17×35−35×11

=595−385

=210

Economics Concept Introduction

Introduction: Market price is one kind of current price in that the asset or service will be purchase or sale. In terms of economic theory, marginal cost defined as the point of forces of demand and supply meet.it is the prevailing price on the certain day or a certain time.

c)

To determine

To describe: The industry in long-run equilibrium at the given price.

c)

Expert Solution

Answer to Problem 6E

Firm is not in long-run equilibrium and also firm gets only normal in long-run purely competitive market.

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Purely competitive market is characterized by the large number of buyers and sellers in the market. Price is decided by the demand and supply forces in the market. Firm earns the abnormal profit at this price and more firms would be attracted toward the market. Abnormal profit would be withered away. Now each firm would be earning normal profit.

Economics Concept Introduction

Introduction: When long run equilibrium occur, that time the marginal revenue equals to the marginal costs to be also equal to the average total costs. This type of equilibrium will be appeared in perfectly competitive market.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 10, Problem 6E

a)

To determine

To calculate: The marginal cost and an average cost schedule for the firm

a)

Expert Solution

Answer to Problem 6E

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST	AVERAGE COST
10	110	-	11
15	150	40	10
20	180	30	9
25	225	45	9
30	300	75	10
35	385	85	11
40	480	95	12

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Marginal cost defines that the extension to the total cost by cause of the increment in one unit of output. Average cost is per unit cost. Total cost is divided by the output to know the average cost.

The following is the marginal and average cost schedule:

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST TCn−TCn−1	AVERAGE COST (TC/Q)
10	110	-	110/10=11
15	150	150−110=40 (40 / 5 =8)	150/15=10
20	180	180−150=30 (30 / 5 =6)	180/20=9
25	225	225−180=45 (45 / 5 =9)	225/25=9
30	300	300−225=75 (75 / 5 =15)	300/30=10
35	385	385−300=85 (85 / 5 =17)	385/35=11
40	480	480−385=95 (95 / 5 =19)	480/40=12

Above schedule depicts the output, total cost, marginal cost and average cost. Marginal cost and average costs schedule have been derived from the output and total cost schedule.

Economics Concept Introduction

Introduction: Marginal cost defined as the production cost that includes all the costs will be vary within that level of the production. Suppose if the firm need to build the new firm to extend to produce the goods and services, the cost of the building firm is called as the marginal cost.

b)

To determine

To calculate: The total number of units will be produced and sold and find the profits per unit and total profits, if the prevailing market price is $17 per unit

b)

Expert Solution

Answer to Problem 6E

The total number of units will be produced and sold is 35

The Profits per unit is $6(17−11)

The total profit is $210

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Let the prevailing market price is $17 per unit.

Explain:

Purely competitive market is characterized by the large number of buyers and sellers. Price is decided by the demand and supply forces. Price is equal to the marginal cost (P=MC).Thus, price and marginal costs are equal at the 35 units of output. A total of 35 units of output will be produced and sold.

Cost per unit is $11 and price per unit is $17.Thus, Profit per unit is $6(17−11) .The following is the total profit (TP).

TP=TR−TC

=17×35−35×11

=595−385

=210

Economics Concept Introduction

Introduction: Market price is one kind of current price in that the asset or service will be purchase or sale. In terms of economic theory, marginal cost defined as the point of forces of demand and supply meet.it is the prevailing price on the certain day or a certain time.

c)

To determine

To describe: The industry in long-run equilibrium at the given price.

c)

Expert Solution

Answer to Problem 6E

Firm is not in long-run equilibrium and also firm gets only normal in long-run purely competitive market.

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Purely competitive market is characterized by the large number of buyers and sellers in the market. Price is decided by the demand and supply forces in the market. Firm earns the abnormal profit at this price and more firms would be attracted toward the market. Abnormal profit would be withered away. Now each firm would be earning normal profit.

Economics Concept Introduction

Introduction: When long run equilibrium occur, that time the marginal revenue equals to the marginal costs to be also equal to the average total costs. This type of equilibrium will be appeared in perfectly competitive market.

Answer 6

Chapter 10, Problem 6E

a)

To determine

To calculate: The marginal cost and an average cost schedule for the firm

a)

Expert Solution

Answer to Problem 6E

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST	AVERAGE COST
10	110	-	11
15	150	40	10
20	180	30	9
25	225	45	9
30	300	75	10
35	385	85	11
40	480	95	12

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Marginal cost defines that the extension to the total cost by cause of the increment in one unit of output. Average cost is per unit cost. Total cost is divided by the output to know the average cost.

The following is the marginal and average cost schedule:

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST TCn−TCn−1	AVERAGE COST (TC/Q)
10	110	-	110/10=11
15	150	150−110=40 (40 / 5 =8)	150/15=10
20	180	180−150=30 (30 / 5 =6)	180/20=9
25	225	225−180=45 (45 / 5 =9)	225/25=9
30	300	300−225=75 (75 / 5 =15)	300/30=10
35	385	385−300=85 (85 / 5 =17)	385/35=11
40	480	480−385=95 (95 / 5 =19)	480/40=12

Above schedule depicts the output, total cost, marginal cost and average cost. Marginal cost and average costs schedule have been derived from the output and total cost schedule.

Economics Concept Introduction

Introduction: Marginal cost defined as the production cost that includes all the costs will be vary within that level of the production. Suppose if the firm need to build the new firm to extend to produce the goods and services, the cost of the building firm is called as the marginal cost.

Answer 7

Chapter 10, Problem 6E

a)

To determine

To calculate: The marginal cost and an average cost schedule for the firm

Answer 8

a)

Expert Solution

Answer to Problem 6E

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST	AVERAGE COST
10	110	-	11
15	150	40	10
20	180	30	9
25	225	45	9
30	300	75	10
35	385	85	11
40	480	95	12

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Marginal cost defines that the extension to the total cost by cause of the increment in one unit of output. Average cost is per unit cost. Total cost is divided by the output to know the average cost.

The following is the marginal and average cost schedule:

OUTPUT(UNITS)	TOTAL COST($)	MARGINAL COST TCn−TCn−1	AVERAGE COST (TC/Q)
10	110	-	110/10=11
15	150	150−110=40 (40 / 5 =8)	150/15=10
20	180	180−150=30 (30 / 5 =6)	180/20=9
25	225	225−180=45 (45 / 5 =9)	225/25=9
30	300	300−225=75 (75 / 5 =15)	300/30=10
35	385	385−300=85 (85 / 5 =17)	385/35=11
40	480	480−385=95 (95 / 5 =19)	480/40=12

Above schedule depicts the output, total cost, marginal cost and average cost. Marginal cost and average costs schedule have been derived from the output and total cost schedule.

Answer 13

Economics Concept Introduction

Introduction: Marginal cost defined as the production cost that includes all the costs will be vary within that level of the production. Suppose if the firm need to build the new firm to extend to produce the goods and services, the cost of the building firm is called as the marginal cost.

Answer 14

b)

To determine

To calculate: The total number of units will be produced and sold and find the profits per unit and total profits, if the prevailing market price is $17 per unit

b)

Expert Solution

Answer to Problem 6E

The total number of units will be produced and sold is 35

The Profits per unit is $6(17−11)

The total profit is $210

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Let the prevailing market price is $17 per unit.

Explain:

Purely competitive market is characterized by the large number of buyers and sellers. Price is decided by the demand and supply forces. Price is equal to the marginal cost (P=MC).Thus, price and marginal costs are equal at the 35 units of output. A total of 35 units of output will be produced and sold.

Cost per unit is $11 and price per unit is $17.Thus, Profit per unit is $6(17−11) .The following is the total profit (TP).

TP=TR−TC

=17×35−35×11

=595−385

=210

Economics Concept Introduction

Introduction: Market price is one kind of current price in that the asset or service will be purchase or sale. In terms of economic theory, marginal cost defined as the point of forces of demand and supply meet.it is the prevailing price on the certain day or a certain time.

Answer 15

b)

To determine

To calculate: The total number of units will be produced and sold and find the profits per unit and total profits, if the prevailing market price is $17 per unit

Answer 16

b)

Expert Solution

Answer to Problem 6E

The total number of units will be produced and sold is 35

The Profits per unit is $6(17−11)

The total profit is $210

Answer 17

b)

Expert Solution

Answer 18

b)

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Let the prevailing market price is $17 per unit.

Explain:

Purely competitive market is characterized by the large number of buyers and sellers. Price is decided by the demand and supply forces. Price is equal to the marginal cost (P=MC).Thus, price and marginal costs are equal at the 35 units of output. A total of 35 units of output will be produced and sold.

Cost per unit is $11 and price per unit is $17.Thus, Profit per unit is $6(17−11) .The following is the total profit (TP).

TP=TR−TC

=17×35−35×11

=595−385

=210

Answer 21

Economics Concept Introduction

Introduction: Market price is one kind of current price in that the asset or service will be purchase or sale. In terms of economic theory, marginal cost defined as the point of forces of demand and supply meet.it is the prevailing price on the certain day or a certain time.

Answer 22

c)

To determine

To describe: The industry in long-run equilibrium at the given price.

c)

Expert Solution

Answer to Problem 6E

Firm is not in long-run equilibrium and also firm gets only normal in long-run purely competitive market.

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Purely competitive market is characterized by the large number of buyers and sellers in the market. Price is decided by the demand and supply forces in the market. Firm earns the abnormal profit at this price and more firms would be attracted toward the market. Abnormal profit would be withered away. Now each firm would be earning normal profit.

Economics Concept Introduction

Introduction: When long run equilibrium occur, that time the marginal revenue equals to the marginal costs to be also equal to the average total costs. This type of equilibrium will be appeared in perfectly competitive market.

Answer 23

c)

To determine

To describe: The industry in long-run equilibrium at the given price.

Answer 24

c)

Expert Solution

Answer to Problem 6E

Firm is not in long-run equilibrium and also firm gets only normal in long-run purely competitive market.

Answer 25

c)

Expert Solution

Answer 26

c)

Expert Solution

Answer 27

Expert Solution

Answer 28

Explanation of Solution

Given:

Assume that a firm in a perfectly competitive industry has the following total cost schedule:

OUTPUT(UNITS)	TOTAL COST($)
10	110
15	150
20	180
25	225
30	300
35	385
40	480

Explain:

Purely competitive market is characterized by the large number of buyers and sellers in the market. Price is decided by the demand and supply forces in the market. Firm earns the abnormal profit at this price and more firms would be attracted toward the market. Abnormal profit would be withered away. Now each firm would be earning normal profit.

Answer 29

Economics Concept Introduction

Introduction: When long run equilibrium occur, that time the marginal revenue equals to the marginal costs to be also equal to the average total costs. This type of equilibrium will be appeared in perfectly competitive market.