Question

a.Suppose the total cost for various levels of output for a competitive firm are given in the table below:

Q	TC
0	10
1	12
2	15
3	19
4	24
5	30
6	37
7	46
8	55
9	65

If the market price is $8, how many units should the firm produce to maximize profit?

6

8

5

7

b,

A firm in a competitive market has the following cost structure:

Output	Total Cost
0	$5
1	$10
2	$12
3	$15
4	$24
5	$40

If the market price is $4, this firm will

shut down in the short run and exit in the long run.

produce three units in the short run and exit in the long run.

produce four units in the short run and exit in the long run.

produce two units in the short run and exit in the long run.

Answer 1

_(% Теме 10 19 24 10 (2-0) - 2 (15-12) ₂3 (19-15) = 4 (24-19) = 5 (30-24)= 6 (37-30) = 7 (46-37) = 9 (55-46) -9 (85-55)=10. 30 37 46 55 65 8 9 MC = (change in Tc) (change in output) produces if p > MC and La perfectly compettive from muammige prufit at paMc. IP = $8 (liven) Till 6 units of output, 6 unit of without P> MC de So him will produce And wer uphon (A)

6 output Total Cast Total fixed cost Total vast. ble lest AVC MC 5 116-5)=5 lo 12 10 15 3.5 (12-10)=2 3:33K15-12),3 (24-15)=9 7 1 (40-24) - 16 40 5 1 35 35 18 7 A hom will produce il P NC Till 3 units of output P > MC G.P - $4) Avc= 3.37 and ATC-5 Corresponding to 3 unit of output. In shat non, from will produce 3 units because Price is greater than Ave in shast run at a=3 (1., $47 3:33) In long rin tim will exit the marked because Pre is less than ATC at 0=3 Answeri motiun () Produce three units in the shat gun and exit in the long run. a Note: TC = TFC at Outhurt = o. TFC remoin frard at each point of out out. TVC 2 TC- IFC AC=(Tc/ output) Avc (Tuc /output) Mea change in Tc Change in output