Chapter 14 14-10 - -10 The market for apple pies in the city of Ectenia is competitive and has the following demand schedule Price \$1 2 3 4 5 6 7 8 9 10

# Chapter 14 14-10 - -10 The market for apple pies in the...

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Chapter 14 14-10 The market for apple pies in the city of Ectenia is competitive and has the following demand schedule: Price Quantit y Deman ded \$1 1,200 pies 2 1,100 3 1,000 4 900 5 800 6 700 7 600 8 500 9 400 10 300 11 200 12 100 13 0 Each producer in the market has fixed costs of \$9 and the following marginal costs: Quantit y Margin al Cost 1 pie \$2 2 4 3 6 4 8 5 10 6 12
a. Compute each producer’s total cost and average total cost for 1 to 6 pies ANS Quantity MC TVC (MCn+M Cn-1) TFC TC (TVC+T FC) ATC (TC/Q) 1 pie \$2 2 9 11 11 2 4 6 9 15 7.5 3 6 12 9 21 7 4 8 20 9 29 7.25 5 10 30 9 39 7.8 6 12 42 9 51 8.5 b. The price of a pie is now \$11. How many pies are sold? How many pies does each producer make? How many producers are there? How much profit does each producer earn? marginal revenue is \$11, each firm will choose to produce 5 pies. Therefore, there will be 40 firms (= 200/5). Each producer will earn total revenue of \$55 (\$11

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