Problem
Assume that a firm in a perfectly competitive market can sell its product for $35 (ie price per unit of output). Furthermore, it faces the following costs:
|
Output (Q)
|
Total Cost
|
|
0
|
25
|
|
1
|
50
|
|
2
|
100
|
|
3
|
120
|
|
4
|
155
|
|
5
|
190
|
|
6
|
250
|
|
7
|
390
|
a) Calculate Total revenue (TR), Marginal Cost (MC), Fixed Cost (FC), Variable cost (VC) and Average Cost (AC).
b) What is the profit maximizing output level?
c) Is this firm is making a profit or loss at profit maximizing output level? Explain.
d) Do you think the firm will continue its production in the short run?
e) What will be the long-run price in this market?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.