Table 1 shows the total cost schedule for a competitive firm. Price per unit of output is £7. Quantity Total Cost 0 15 1 25 2 30 3 34 4 38 5 45 6 55 7 70 8 100 Calculate average total cost (ATC=TC/Q), marginal cost (MC=∆TC/∆Q) and marginalrevenue (MR=∆TR/∆Q) for each level of output. Plot ATC, MC and MR on a graph and mark the profit-maximising (loss minimising) At what output level is profit maximised (loss minimised)? How much profit/loss is made at the optimum level of output?
Table 1 shows the total cost schedule for a competitive firm. Price per unit of output is £7. Quantity Total Cost 0 15 1 25 2 30 3 34 4 38 5 45 6 55 7 70 8 100 Calculate average total cost (ATC=TC/Q), marginal cost (MC=∆TC/∆Q) and marginalrevenue (MR=∆TR/∆Q) for each level of output. Plot ATC, MC and MR on a graph and mark the profit-maximising (loss minimising) At what output level is profit maximised (loss minimised)? How much profit/loss is made at the optimum level of output?
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter12: The Cost Of Production
Section12.3: The Various Measures Of Cost
Problem 3QQ
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Question
Table 1 shows the total cost schedule for a competitive firm. Price per unit of output is £7.
Quantity |
Total Cost |
0 |
15 |
1 |
25 |
2 |
30 |
3 |
34 |
4 |
38 |
5 |
45 |
6 |
55 |
7 |
70 |
8 |
100 |
- Calculate
average total cost (ATC=TC/Q), marginal cost (MC=∆TC/∆Q) and marginalrevenue (MR=∆TR/∆Q) for each level of output. - Plot ATC, MC and MR on a graph and mark the profit-maximising (loss minimising) At what output level is profit maximised (loss minimised)?
- How much profit/loss is made at the optimum level of output?
- Assume that the firm’s minimum
average variable cost is £6.5. Should the firm continueoperating in the market in the short run? In the long run? - If the firm is typical of other firms in the market, what price will it charge in the long run? Explain.
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Follow-up Question
- Assume that the firm’s minimum average variable cost is £6.5. Should the firm continueoperating in the market in the short run? In the long run?
- If the firm is typical of other firms in the market, what price will it charge in the long run? Explain.
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Follow-up Question
- Assume that the firm’s minimum
average variable cost is £6.5. Should the firm continueoperating in the market in the short run? In the long run? - If the firm is typical of other firms in the market, what price will it charge in the long run? Explain.
Solution
by Bartleby Expert
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