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1. A firm's cost curves are given by the following table:

Q TC TFC TVC AVC ATC MC
0 $100 $100 _______ _______ _______ _______
1 130 100 _______ _______ _______ _______
2 150 100 _______ _______ _______ _______
3 160 100 _______ _______ _______ _______
4 172 100 _______ _______ _______ _______
5 185 100 _______ _______ _______ _______
6 210 100 _______ _______ _______ _______
7 240 100 _______ _______ _______ _______
8 280 100 _______ _______ _______ _______
9 330 100 _______ _______ _______ _______
10 390 100 _______ _______ _______ _______

a. Complete the table.

b. Graph AVC, ATC, and MC on the same graph. What is the relationship between the MC curve and the ATC, and between MC and AVC?

c. Suppose that market price is $30. How much will the firm produce in the short run? How much are total profits?

d. Suppose that market price is $50. How much will the firm produce in the short run? What are total profits?

e. Suppose that market price is $10. How much would the firm produce in the short run? What are total profits?

2. The following problem traces the relationship between firm decisions, market supply, and market equilibrium in a perfectly competitive market.

a. Complete the following table for a single firm in the short run:

OUTPUT TFC TVC TC  AVC ATC MC
0 $300 $0 _______ _______ _______ _______
1 _______ 100 _______ _______ _______ _______
2 _______ 150 _______ _______ _______ _______
3 _______ 210 _______ _______ _______ _______
4 _______ 290 _______ _______ _______ _______
5 _______ 400 _______ _______ _______ _______
6 _______ 540 _______ _______ _______ _______
7 _______ 720 _______ _______ _______ _______
8 _______ 950 _______ _______ _______ _______
9 _______ 1,240 _______ _______ _______ _______
10 _______ 1,600 _______ _______ _______ _______

b. Using the information in the table, fill in the following supply schedule for this individual firm under perfect competition, and indicate profit (positive or negative) at each output level. (Hint: At each hypothetical price, what is the MR of producing one more unit of output? Combine this with the MC of another unit to figure out the quantity supplied.)

PRICE QUANTITY SUPPLIED PROFIT
$50 _______ _______
70 _______ _______
100 _______ _______
130 _______ _______
170 _______ _______
220 _______ _______
280 _______ _______
350 _______ _______

 

Microeconomics, Economics

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