Question

Output by ton Total cost 25 35 2 50 70 95 6 7 122 160 200 "Carrots" is a profit maximizing perfectly competitive firm whose output and cost data are given in the table above. If the market price of a ton of carrots is $30, how many will "Carrots" produce? What is the range of market prices for a ton of carrots that will induce "carrots" to produce exactly 6 tons of carrots? if production costs at "Carrots" are exactly the same as at every other firm in the industry and the price is $32, what do you expect will happen in the long run in the industry? What will be the price of a ton of carrots in the long-run? Explain how you arrived to your answers.

Answer 1

1.

Output	Total Cost	TR	Profit	ATC
0	25	0	-25
1	35	30	-5	35.00
2	50	60	10	25.00
3	70	90	20	23.33
4	95	120	25	23.75
5	122	150	28	24.40
6	160	180	20	26.67
7	200	210	10	28.57

For the market price of $30, 5 tons of carrots would produced because of maximum profit

2)

Output	Total Cost	TR	Profit
0	25	0	-25
1	35	39	4
2	50	78	28
3	70	117	47
4	95	156	61
5	122	195	73
6	160	234	74
7	200	273	73

At a price of $39, 6 tons would be produced as the profit is maximum

3.

Because of positive profit, many new producers enter to gain the profit share

4. In long run the price would be of minimum average total cost which is $ 23.33