pc2a - 5 42 8.4 6.4 32 42 6 56 9.33 7.67 46 56 7 75 10.7...

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Additional Problem 2 Answers: Pure Competition 1. Using the following information, complete the table below. Q TC MC P MR AR TR Total Profit 0 $10 $10 -10 1 16 6 10 $10 $10 $10 -6 2 20 4 10 10 10 20 0 3 25 5 10 10 10 30 5 4 32 7 10 10 10 40 8 5 42 10 10 10 10 50 8 6 56 14 10 10 10 60 4 7 75 19 10 10 10 70 -5 8 100 25 10 10 10 80 -20 9 132 32 10 10 10 90 -42 MR = MC and MC is Rising a) Determine the price and output selection for this purely competitive firm. Is this a short-run or long-run equilibrium? Why? P MAX = $10 Short-Run ! Fixed Costs Q MAX = $5 Diminishing Returns Total Profit = $8 b) Utilizing the TR and TC approach to graphically illustrate the equilibrium results for this firm. TC TR ! P = $10 $ TFC = $10 Q 0 Q MAX = 5 c) Calculate the ATC and AVC for this firm. At what price level will the firm break- even? shut-down?
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2 Q TC ATC* AVC* TVC TC 0 $10 $10 1 16 $16 $6 $6 16 2 20 10 5 10 20 3 25 8.33 5 15 25 4 32 8 5.5 22 32
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Unformatted text preview: 5 42 8.4 6.4 32 42 6 56 9.33 7.67 46 56 7 75 10.7 9.29 65 75 8 100 12.5 11.25 90 100 9 132 14.67 13.56 122 132 MR = MC, MC Rising P BE = AR = min ATC = $8 P SD = AR = min AVC = $5 d) Utilizing the MR and MC approach graphically illustrate the results for equilibrium for this firm determined in part (a). Total Profit = $8 $ MC ATC P MAX = $10.00 D=AR=P=MR $8.40 AVC P BE = $8.00 P SD = $5.00 Per Unit Profit = $1.60 5 Q Q MAX e) In your graph for part (d) show the price level at which the firm will break even. Then show the price level at which the firm will shut down. P BE = $8.00 = break-even price level P SD = $5.00 = shut-down price level...
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pc2a - 5 42 8.4 6.4 32 42 6 56 9.33 7.67 46 56 7 75 10.7...

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