1) Answer the next questions (Parts A and B) on the basis of the following cost data for a firm operating in pure competition-
OUTPUT ------ TFC -------- TVC
0 $50.00 0.00
1 50.00 90.00
2 50.00 160.00
3 50.00 200.00
4 50.00 260.00
5 50.00 340.00
6 50.00 450.00
(a) Refer to the above data. If the product price is $55, at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations.
(b) Refer to the above data. If the product price is $70, at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations.
Q- A software producer has fixed costs of $30,000 per month and her Total Variable Costs (TVC) as a function of output Q are given below:
Q TVC Price
3,000 $ 5,000 $5
13,000 25,000 4
23,000 50,000 3
33,000 80,000 2
43,000 120,000 1
(a) If software can only be produced in the quantities above, what should be the production level if the producer operates in a monopolistic competitive market where the price of software at each possible quantity is also listed above? Why? (Show all work.)
(b) What should be the production level if fixed costs rose to $50,000 per month? Explain.