Chapter 8, Problem 10PAE

A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, average total cost of $8, and fixed cost of $200. What is its profit? What is its marginal cost? What is its average variable cost?

Firms in the market for soccer balls are selling in a purely competitive market. A firm in the soccer ball market has an output of 5,000 balls, which it sells for $10 each. At the output level of 5,000 the average variable cost is $6.00, the average total cost is $7.50, and the marginal cost is $10.00.                                                                                                                      What would you expect the firm to do in the short run? Why?   What would you expect the market to do in the long run? Why?

A perfectly competitive firm has the following fixed and variable costs in the short run. The market price for the firm’s product is $150.             Output                FC                   VC               TC             TR       Profit/Loss                0                 $100                       $    0            ___             ___       ___                1                     100                     100               ___             ___             ___                2                     100                      180               ___             ___             ___                3                     100                        300               ___             ___             ___               4                     100                         440               ___             ___             ___               5                     100                         600               ___             ___             ___               6                     100…