A firm in a purely competitive industry is currently


A firm in a purely competitive industry is currently producing 1,200 units per day at a total cost of $500. If the firm produced 1,000 units per day, its total cost would be $350, and if it produced 700 units per day, its total cost would be $325.

a. What are the firm's ATC at these three levels of production?

At 1,200 units per day, ATC =

At 1,000 units per day, ATC =

At 700 units per day, ATC =

b. If every firm in this industry has the same cost structure, is the industry in long-run competitive equilibrium?

c. From what you know about these firms' cost structures, what is the highest possible price per unit that could price in long-run equilibrium?

d. If that price ends up being the market price and if the normal rate of profit is 10 percent, then how big will each firm's accounting profit per unit be?

Solution Preview :

Prepared by a verified Expert
Microeconomics: A firm in a purely competitive industry is currently
Reference No:- TGS01550221

Now Priced at $15 (50% Discount)

Recommended (99%)

Rated (4.3/5)