lab 7 - Econ 203 lab 7 Page 1 November 15-19 2010 Economics...

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Econ 203 lab 7 Page 1 November 15-19, 2010 Economics 203: Intermediate Microeconomics I Lab Exercise #7 Section 1: Test Your Understanding True or False? 1) No industry, now or in the past, has met all of the requirements of perfect competition. 2) Under perfect competition the product of any one seller must be the same as the product of any other seller. 3) For a perfectly competitive firm, choose the output rate at which marginal cost is equal to price. 4) If a firm’s marginal cost curve intersects its average variable cost curve at $4 per unit out output, the firm will shut down in the short run if the price of its product falls below $4 per unit. Section 2: Applications 1) Suppose that the total costs of a perfectly competitive firm are as follows: 0 40 1 60 2 90 3 130 4 180 5 240 a) If the price of the product is $50, what output rate should the firm choose? b) Suppose the firm experienced an increase of $30 in its fixed costs. What is its new total cost function?
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