17. A firm in a perfectly competitive industry faces the following long run total cost schedule: 2 4 $100 6 $140 $50 What is the price in this market? Qty TC 8 $160 10 $240 12 $360 14 $600 16 $750
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- Apex is a perfectly competitive firm. It has total fixed costs of $300/day and a daily variable cost schedule in the table below. Apex’s product sells for $200 per unit. Quantity (units) 0 1 2 3 4 5 6 7 8 9 10Total Variable Cost (TVC) 0 100 180 220 300 390 500 640 800 1000 1250Answer the following questions:1. If the market price dropped to $80, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case?2. If the market price dropped further to $40, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case?3. Comment on your answers to parts (1) and (2).5. (a) What do we mean by “price taker”? Explain why a firm in perfect competition is a price taker.How is this price determined? Explain. (b) “The demand curve for a perfectly competitive firm ishorizontal and it is also the firm’s marginal revenue curve.” Explain.Apex is a perfectly competitive firm. It has total fixed costs of $300/day and a daily variable cost schedule in the table below. Apex’s product sells for $200 per unit. Quantity (units) 0 1 2 3 4 5 6 7 8 9 10Total Variable Cost (TVC) 0 100 180 220 300 390 500 640 800 1000 1250Answer the following questions:a. What is the profit-maximizing level of output? Calculate Apex’s profit.b. If the market price dropped to $80, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case?c. If the market price dropped further to $40, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case?d. Comment on your answers to parts (2) and (3
- Assume that a firm in a perfectly competitive industry has the following total cost schedule:OUTPUT (UNITS) TOTAL COST ($) 10 110 15 150 20 180 25 225 30 300 35 385 40 480a. Calculate a marginal cost and an average cost schedule for the firm. b. If the prevailing market price is $17 per unit, how many units will be produced and sold? What are profits per unit? What are total profits? c. Is the industry in long-run equilibrium at this price?14. Zero economic profit earned by firms in a perfectly competitive market indicates that A firms will exit in the long run.B total revenue covers all variable costs of production exactly.C MR < AR.D P = ATC.E zero normal profit.5. The cost function for a firm facing perfect competition isC(q)=1000+25q-0.5q^2+0.01q^3 Sketch the firm’s cost curves and supply curve on one set of axes. a.sketch MC,AVCAFC, and ATC. The basic shapes and relationshipsshould reflect the cost functions above,but you do not need exact numbers. b. On the same axes,sketch the firm’s supply curve.Your curve shouldstart from P=0.
- A computer company produces affordable, easy-to-use home computer systems and has fixed costs of $250. The marginal cost of producing computers is as indicated below. Output Fixed Cost Variable Cost Total Cost Marginal Cost Average Cost Average Variable Cost 1 $250 $700 $950 $700 2 $250 $925 $1175 $225 3 $250 $315 4 $250 $360 5 $250 $400 6 $250 $450 7 $250 $550 If the company sells the computers for $550, is it making a profit or a loss? How big is the profit or loss? If the firm sells the computers for $315, is it making a profit or a loss? How big is the profit or loss? We expect the marginal cost to increase as this firm produces more computers. But when the firm shifts from producing 1 to 2 computers, marginal cost falls. What might explain this?a. A firm operating in a perfectly competitive market is earning K20 million economic profits. What is the firms accounting profits if the opportunity cost is K30 millionb. What will be the firm’s economic profits in the long run? c. Company ‘A’ has been recording accounting profits averaging K50 million by investing in project C. It could earn K60 million and K70 million in projects D and E, respectively. What is the company’s current economic profit? d. Advise management what to do in the long run e. Project ‘B’ has a net present value of zero after applying a discount rate of 10%, which is the risk adjusted required rate of return that takes into account the riskiness of the project. What return is earned on this project f. After a risk assessment, it is discovered that project ‘B’ has become more risky and the risk adjusted required return to use must be 12%. Will the net present value of project ‘B’ still remain zero?only typed answer Assume a competitive firm faces a market price of $120, a cost curve of: C = 13q3 + 20q + 500, and a marginal cost of: MC = q2 +20. What is the firm's profit maximizing output level? ?? Units (round your answer to two decimal places) What is the firm's profit maximizing price? ??? (round to the nearest penny) What is the firm's profit? ??? (round to the nearest npenny) In the short-run, this firm should ?? produce or shut down??
- Case D: Apex Company. Apex is a perfectly competitive firm. It has total fixed costs of $300/day and a daily variable cost schedule in the table below. Apex’s product sells for $200 per unit. Quantity (units) 0 1 2 3 4 5 6 7 8 9 10 Total Variable Cost (TVC) 0 100 180 220 300 390 500 640 800 1000 1250 Answer the following questions: What is the profit-maximizing level of output? Calculate Apex’s profit. If the market price dropped to $80, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case? If the market price dropped further to $40, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case? Comment on your answers to parts (2) and (3).1) There is an oil change firm in town called Oil Pro. The total cost function for Oil Pro is below. What is the break-even price in this market? TC=125+5q^2 A) P=60 B) P=50 C) P=40 D) P=3037) In a perfectly competitive industry, the market price of the product is $15. Firm A is currently producing 300 units. The firm's marginal cost is $15, its fixed costs amount to $1000 and its average variable cost equals $10. Which one of the following is true for this firm?a) it’s profits are 500 $b) it’s profits are -500 $c) it’s profits are -1500 $d) it’s profits are 1500 $
