A perfectly competitive firm faces the short-run cost schedule shown in Table (a)Calculate average total cost (ATC=TC/Q), marginal cost (MC=ATC/AQ) and marginal revenue (MR-ATR/AQ) for each level of output. The price per unit of output is £16 b) Plot ATC, MC and MR on a graph and mark the profit-maximising output. At what output is profit maximised? c) How much profit/loss is made at the optimum level of output? Assume market price declines to £9 per unit. If the firm's average variable cost is £9.5, should the firm shut down in the short run? In the long run? Explain. If the firm is typical of other firms, what price will it charge in the long run? Explain.
A perfectly competitive firm faces the short-run cost schedule shown in Table (a)Calculate average total cost (ATC=TC/Q), marginal cost (MC=ATC/AQ) and marginal revenue (MR-ATR/AQ) for each level of output. The price per unit of output is £16 b) Plot ATC, MC and MR on a graph and mark the profit-maximising output. At what output is profit maximised? c) How much profit/loss is made at the optimum level of output? Assume market price declines to £9 per unit. If the firm's average variable cost is £9.5, should the firm shut down in the short run? In the long run? Explain. If the firm is typical of other firms, what price will it charge in the long run? Explain.
Chapter8: Production And Costs
Section8.4: Costs Of Production: Total, Average, Marginal
Problem 1ST
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Question
A
(a)Calculate
b) Plot ATC, MC and MR on a graph and mark the profit-maximising output. At what output is profit maximised?
c) How much
Assume market price declines to £9 per unit. If the firm's
If the firm is typical of other firms, what price will it charge in the long run? Explain.
Transcribed Image Text:Total cost
output
12
4
1.
40
20
567
68
26
93
3
8
32
122
2.
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