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Pure_Competition_Problem (1) (2)

# Pure_Competition_Problem (1) (2) - Explain What will its...

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Assume a single firm in a purely competitive industry has variable costs as indicated in the following table in column 2. Complete the table and answer the questions. (1) Total product (2) Total var. cost (3) Total cost (4) AFC (5) AVC (6) ATC (7) MC 0 \$ 0 \$ 40 \$_____ \$_____ \$_____ 1 55 _____ _____ _____ _____ \$_____ 2 75 _____ _____ _____ _____ _____ 3 90 _____ _____ _____ _____ _____ 4 110 _____ _____ _____ _____ _____ 5 135 _____ _____ _____ _____ _____ 6 170 _____ _____ _____ _____ _____ 7 220 _____ _____ _____ _____ _____ 8 290 _____ _____ _____ _____ _____ (a) At a product price of \$52, will this firm produce in the short run? Explain. What will its profit or loss be? (b) At a product price of \$28, will this firm produce in the short run? Explain. What will its profit or loss be? (c) At a product price of \$22, will this firm produce in the short run?
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Unformatted text preview: Explain. What will its profit or loss be? (d) Complete the following short-run supply schedule for this firm. Product Quantity Profit (+) price supplied or loss (–) \$72 _____ _____ 52 _____ _____ 45 _____ _____ 28 _____ _____ 22 _____ _____ 15 _____ _____ Assume there are 500 identical firms in this industry, that they have identical cost data as the firm above, and that the industry demand schedule is as follows: Price Quantity demanded \$72 2,500 52 3,500 45 4,000 28 5,200 22 5,900 15 6,700 (e) What will the equilibrium price be? (f) What will the equilibrium output for each firm be? (g) What will profit or loss be per unit? h) What will profit or loss be per firm?...
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