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Q. A firm in a purely competitive business is currently producing a 1000 unit/day at a total cost of $450. If the firm produced 800 units / day, it total cost will be $300, and it it produced 500 units / day, it total cost will be $275. Requirements:

(1) Elucidate the firm's ATC per unit at these three levels of production?

(2) If every firm in this industry has the same cost structure, is the industry in long-run competitive equilibrium?

(3) From what you know about these firms' cost structure, what is the highest possible price per unit that could be existing as the market price in the long run equilibrium?

(4) If that price ends up being the market price and if the normal rate of profit is 10%, how big will each firm's accounting profit per unit?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9157153

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