Perfect Competition: Graph Refer to the graph below which shows a pizza seller's marginal, average variable, and average total cost curves. Suppose the price of pizza is $2.50 per slice. Cost Curves 3.50 3.25 3.00 MC ATC 2.75 AVC 2.50 2.25 2.00 1.75 8 1.50 1.25 1.00 0.75 0.50 0.25 100 200 300 400 500 600 700 800 900 Quantity (slices/day) Price ($/slice) What is the profit-maximizing output level? slices per day At that output level, what is the average fixed cost per day? $ What is the total cost per day? What is the profit per slice? $ What is the producer's total profit (per day)? $ %24

Perfect Competition: Graph Refer to the graph below which shows a pizza seller's marginal, average variable, and average total cost curves. Suppose the price of pizza is $2.50 per slice. Cost Curves 3.50 3.25 3.00 MC ATC 2.75 AVC 2.50 2.25 2.00 1.75 8 1.50 1.25 1.00 0.75 0.50 0.25 100 200 300 400 500 600 700 800 900 Quantity (slices/day) Price ($/slice) What is the profit-maximizing output level? slices per day At that output level, what is the average fixed cost per day? $ What is the total cost per day? What is the profit per slice? $ What is the producer's total profit (per day)? $ %24

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 12RQ: What are the four basic assumptions of perfect competition? Explain in words what they imply for a...

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What are the four basic assumptions of perfect competition? Explain in words what they imply for a perfectly competitive firm.
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Cost figures for a hypothetical firm are given in the following table. Use them for the exercises below. The firm is selling in a perfectly competitive market. Output Fixed AFC Variable AVC Total ATC MC Cost Cost cost 1 $50 50/1=50 $30 30/1=30 30+50=80 80/1=80 NA 2 $50 50/2=25 $50 50/2=25 50+50=100 100/2=50 (100-80)/(2-1)=20 3 $50 50/3=16.67 $80 80/3=26.67 50+80=130 130/3=43.33 (130-100)/(3-2)=30 4 $50 50/4=12.50 $120 120/4=30 50+120=170 170/4=42.50 (170-130)/(4-3)=40 5 $50 50/5=10 $170 170/5=34 50+170=220 220/5=44 (220-170)/(5-4) =50 What can you expect from an industry in perfect competition in the long run? That is, what will the price be? What quantity will be produced? What will be the relation between marginal cost, average cost, and price?