problem: The costs below are for one of many, identical firms in a competitive market.
|
Output
|
Total
|
Total
|
|
|
Fixed
|
Variable
|
|
|
Cost
|
Cost
|
|
0
|
50
|
0
|
|
1
|
50
|
50
|
|
2
|
50
|
78
|
|
3
|
50
|
98
|
|
4
|
50
|
112
|
|
5
|
50
|
130
|
|
6
|
50
|
150
|
|
7
|
50
|
175
|
|
8
|
50
|
204
|
|
9
|
50
|
242
|
|
10
|
50
|
300
|
|
11
|
50
|
385
|
[A] At what level of output is the 'shut down' point?
[B] At what level of output would the firms be profit maximizing if the market determined price were USD 25 per unit?
[C] Would the firms enjoy an economic profit or suffer an economic loss at the profit maximizing level of output for a price of $25 per unit? If so, what is the size [in dollars] of the profit or loss?
[D] Given the result in part c. above, describe the process that would occur in this market to bring it to a stable, long-run position.
[E] Would the firms enjoy an economic profit or suffer an economic loss at the profit maximizing level of output for a price of $38 per unit? If so, what is the size [in dollars] of the profit or loss?
[F] Compute Average Fixed Cost, Average Variable Cost, Average Total Cost, and Marginal Cost.
[G] Plot Average Fixed Cost, Average Variable Cost, Average Total Cost, and Marginal Cost.