Firm costs and revenues

Question

Question:

 You are given the following data about two firms:

FIRM A

Quantity	0		1		2		3		4		5		6
Total revenue ($)	0		10		20		30		40		50		60
Average revenue ($)	0		10		10		10		10		10		10
Marginal revenue ($)		10		10		10		10		10		10
Total cost ($)	30		42		50		60		76		100		140
Marginal cost ($)		12		8		10		16		24		40
Average cost ($)	∞		42		25		20		19		20		23.3333333

FIRM B

Quantity	0		1		2		3		4		5		6
Total cost ($)	100		134		154		177		216		266		366
Average cost ($)	∞		134		77		59		54		53.2		61
Marginal cost ($)		34		20		23		39		50		100
Price ($)	140		130		120		110		100		90		80
Marginal revenue ($)		130		110		90		70		50		30
Total revenue ($)	0		130		240		330		400		450		480

(a)   Complete the two tables above.

(b)   Are these firms operating in the short or the long run?     

Firm A: short run / long run

Firm B: short run / long run

(c)    Are these firms operating under perfect or imperfect competition?       

Firm A: perfect / imperfect

Firm B: perfect / imperfect

(d)   What level of output will these firms produce in the short run?             

Firm A:               

Firm B:               

(e)   How would you describe their profit positions?

Firm A:    

Firm B:    

Summary:

The question is about two firms A and B which are operating in the same market and are rivals. Their costs and revenues are given. The level of output and profit margin has been determined.

Answer:

• Firm A: short run, Firm B: short run
• Firm A: Perfect, firm B: Imperfect
• Firm A: MR = MC happens at q= 3. Therefore, it will produce 3 units of output. Firm B: MR = MC happens at q= 5. Therefore, it will produce 5 units of output.
• Firm A has total cost of 60 and total revenue is 30. Therefore, it is incurring losses of 30. Firm B has total revenue of 450 and total cost of 266. Therefore, it is making profits equivalent to 184