Question

Total Total Product Fixed Cost O $150 1 150 2 150 3 150 4 150 5 150 150 150 150 9 150 10 150 Total variable Cost $ 0 50 75 105 145 200 270 360 475 620 800 Based on the cost data given in the accompanying table, which of the price-quantity tables correctly represents the firm's short-run supply schedule? OS a) (b) (c) (d) PQs PQs PQs PT $20 1 $ 20 0 $20 0 $20 | 30 1 2 300 30 30 453 45 4 45 455 604 605 600 60 6 75 5 756 755 75 7 956 957 95 6958 120 120 8 120 120 150 8150 91508 150 00valuw 7 00 10

Answer 1

The short run supply curve of a perfectly competitive firm is lies above the average variable cost curve starting from minimum point of AVC. A competitive firm supply lies above its shutdown point (P<AVC) of firm. Total Product Total Fixed Cost (3) Total variable Cost (S) Average variable cost (S) Marginal cost (8) 150 50 37.5 40 36.25 40 45 90 360 475 620 800 51.4285714 59.375 68.8888889 10 150 80 AVC/MC AVC 1 2 10 12 4 6 8 Total Product/Quantity Figure 1

As it is calculated the minimum point of AVC is $35, below this firm will supply nothing Therefore, at price $20 and $30 the quantity supply would be zero. Hence, table a and d not correctly represent the supply schedule. Hence, option a and care incorrect. Now if the P> 35 firm will supply some quantity, which means supply can't be zero at $45 and $60. Hence, table c not correctly represent the supply schedule. Hence, option d is incorrect. Therefore, based on the cost data given in the accompanying table, "option b" price quantity table correctly represents the firm's short-run supply schedule is correct.