11quiz2Lau - Question1 Consider a perfectly competitive...

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Question1. Consider a perfectly competitive market for carrots. For a firm in the carrot market (carrot production is a perfectly competitive industry), the fixed cost of producing carrots is $100, and the wage rate for each unit of labor is $10. (a) The first two columns in the following table show the number of units of labor employed and the number of carrots produced using the labor. Fill the rest of the table. (5 points) Labor Total output TC MC AC 1 1 xxxxxxxxxxxxxxxx xxxxx 2 2 5 3 10 4 17 5 26 6 (b) What is the definition of Marginal Cost? Explain it in words. Plot 2 points on the marginal cost curve using the numbers in the table. Why does the curve have such a shape? (15 points) (c) The price of a carrot is $70. Find the optimal level of carrot production. Explain why the amount you chose is optimal. (15 points) (d) Calculate the profit of the firm at the optimal output level, and show this profit in a diagram. You do not need to provide every detail, but mark the coordinates of relevant points. (10 points) (e) What will be the profit of the firm in the long-run? Show the long-run profit in a diagram
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